Brexit

UK Finance and techUK call for post-Brexit deal on data protection

Two industry associations, UK Finance and techUK, called on the UK government and the EU to act quickly to prepare mutual adequacy agreements to enable the continuing protection for cross-border exchange of personal data between the two regions by customers and banks and other businesses following Brexit. Unless a new arrangement is agreed, they warn that transfers of personal data across Europe will be severely limited or stop, with potentially dire consequences for both economies.

Philip Hammond sets out strengths of London financial services sector

The Chancellor of the Exchequer, Philip Hammond, delivered a speech in which he said it was vital that London retained its global importance in financial services and that it was the government’s priority to achieve an outcome from the negotiations with the EU that maintains effective, mutual access to European markets. Mr Hammond said he wanted a relationship with the EU based on strong mutual respect and friendship, close collaboration on security, and the freest and most frictionless trade possible.

ESMA executive director discusses Brexit, MMFs and MiFID II

ESMA’s executive director, Verena Ross, delivered a speech at the ICI Global 2017 Capital Markets Conference, in which she discussed ESMA’s supervisory convergence work on Brexit, money market funds, MiFID II, and its 2018 plans on costs and charges of investment funds.

Financial Conduct Authority updates

FCA publishes quarterly consultation on Handbook changes

The FCA opened its quarterly consultation (CP17/39) on proposed miscellaneous amendments to its Handbook.

FCA policy development update for December 2017

The FCA published the latest version of its policy development update, which provides information on its recent and upcoming publications. Future publications include policy statements on implementation of the Insurance Distribution Directive, which are expected in December 2017 and January 2018, and a policy statement and further consultation on implementation of the Financial Advice Market Review, scheduled for December 2017.

Prudential Regulation Authority updates

PRA regulatory digest for November 2017

The Prudential Regulation Authority (PRA) published its regulatory digest for November 2017. This issue includes the Bank of England’s (BoE) latest Financial Stability Report, the results of the 2017 stress tests of the UK banking system, and the PRA’s framework for authorisation and supervision of insurance special purpose vehicles.

Regulatory architecture

Commission follows up on call for evidence and consults on supervisory reporting

The European Commission published a progress report on the follow-up to its 2015 call for evidence on the EU regulatory framework for financial services. At the same time, it has launched a public consultation on supervisory reporting requirements, in response to concerns raised in the call for evidence about the burden and costs that such requirements impose on market players.

Council of the EU sets out progress made on financial services legislation

The Council of the EU published a report listing the progress made on key financial services legislative files. The report supports the any other business item on the agenda for the upcoming meeting of the Economic and Financial Affairs Council.

FPC publishes record of November meetings

The Financial Policy Committee (FPC) released a record of its meetings held on 22 and 27 November 2017. At the first of the two meetings the FPC aimed to agree its view on the outlook for financial stability and, on the basis of that, its intended policy action. The second meeting was to confirm its response to the results of the 2017 annual cyclical scenario (ACS) stress test of the UK banking system, its setting of the UK countercyclical capital buffer rate, and its approach to the biennial exploratory scenario (BES) for the UK banking system, which the Bank had run for the first time in 2017.

ESAs publish 2017 list of financial conglomerates

The Joint Committee of the three European Supervisory Authorities (the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and European Securities and Markets Authority (ESMA)—ESAs) published the 2017 list of identified financial conglomerates. The list includes 80 financial conglomerates with the head of group located in the EU or European Economic Area, one in Switzerland, one in Bermuda, and two in the United States.

The director of supervision for investment, wholesale and specialists at the FCA, Megan Butler, delivered a speech setting out the FCA’s expectations on defined benefit to defined contribution (DB to DC) transfer advice, whistleblowing, and the new MiFID II requirements. Ms Butler said encouraging whistleblowing was essential in order to drive out bad practice across the sector, and that although the FCA was on course to see a 5% rise in such reports in 2017, there were fewer whistleblowers coming forward from the advice market than from other sectors, putting investors at risk of losing their savings as a result of poor or dishonest advice.

Prudential requirements

PRA: Model risk management principles for stress testing

The PRA issued a consultation paper (CP26/17) which sets out its proposals to support effective practices in model risk management for stress testing. A set of principles has been developed in the context of the annual concurrent stress testing process, which tests the resilience of the banking system and some of the largest firms within it. The PRA proposes to embed these principles further for firms participating in the annual concurrent stress tests and extend the principles, in a proportionate manner, to the wider banking sector. The consultation closes on Tuesday 6 March 2018.

Pillar 2: Update to reporting requirements—CP25/17

The PRA issued a consultation paper (CP25/17), proposing a new data item (PRA111) to capture stress testing data currently included in firms’ internal capital adequacy assessment process (ICAAP) documents. The CP also proposes a reduction in the frequency of reporting of the data items in the reporting Pillar 2 Part of the PRA Rulebook (‘Pillar 2 data items’) for some firms, and consolidation of definitions in several reporting Parts of the PRA Rulebook into the Glossary. The consultation closes on 6 March 2018.

European Parliament publishes details of final vote on new EU rules on who bears banks’ losses

The European Parliament issued a press release stating that it has decided in favour of clear rules on the order in which troubled banks’ creditors are liable to cover losses. The Parliament voted in plenary to adopt its position at first reading on the European Commission’s proposed directive amending the Bank Recovery and Resolution Directive 2014/59/EU (BRRD) as regards the ranking of unsecured debt instruments in insolvency hierarchy.

Council of the EU adopt new rules on who bears banks’ losses

The Council of the EU adopted a proposal for a Directive amending the BRRD as regards the ranking of unsecured debt instruments in insolvency hierarchy.

The European Parliament voted in plenary to adopt its position at first reading on the European Commission’s proposed regulation regarding transitional arrangements to mitigate the impact of the introduction of IFRS 9 on own funds and for the large exposures treatment of certain public sector exposures denominated in currencies other than those of domestic Member States.

Council of the EU adopt new rules on IFRS 9 transitional arrangements

The Council of the EU adopted a proposal for a Regulation amending the Capital Requirements Regulation (Regulation (EU) 575/2013) as regards transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds and the large exposures treatment of certain public sector exposures denominated in non-domestic currencies of Member States.

Council of the EU publishes report on the Banking Package and four compromise texts

The Council of the EU published a report from the Estonian Presidency addressed to the Permanent Representatives Committee/Council setting out the progress that has been made concerning the package of banking legislative proposals (the ‘Banking Package’) produced by the Commission pursuant to the Council’s 2016 roadmap to complete the Banking Union. As regards the remaining four elements of the Package, the Presidency has prepared compromises on:

Council of the EU reports on strengthening the banking union

The Council of the EU published a joint progress report on three key pieces of EU work—the European Deposit Insurance Scheme, the Banking Package and non-performing loans. The aim of the progress report is to set out the objectives of the ECOFIN Council as regards the strengthening of the banking union.

ECON publishes draft reports on CRD IV and CRR proposals

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) published draft reports on two European Commission proposals to amend the Capital Requirements Directive 2013/36/EU (CRD IV) and Regulation (EU) No 575/2013 (CRR):

The proposals were made by the Commission in November 2016 as part of its larger package of changes to banking legislation. While ECON agreed with the overall objectives underpinning the proposed revisions, it recommends a number of amendments in some key areas.

Council of the EU endorses rules on BRRD valuations

The General Secretariat of the Council of the EU recommended that the Council confirm that it has no objection to the European Commission’s delegated regulations specifying valuation methodologies under the BRRD:

EBA closes breach of Union law investigation against DNB in relation to CRR capital requirements

The Breach of Union Law Panel of the EBA decided to close the breach of Union Law investigation (BUL) against the Dutch Central Bank (DNB) in relation to the Dutch supervisory regime governing proprietary traders. The BUL panel’s conclusion followed the decision taken by the DNB on 13 November 2017 to redress the breach of Union law by terminating the current national prudential framework for traders for own account. The DNB will notify the EBA on capital conservation plans adopted by the firms concerned and the EBA will monitor the application of these transitional measures.

FSB consults on bank resolution guidance

The Financial Stability Board (FSB) is consulting on two sets of guidance targeting ‘too-big-to-fail’. The proposed guidance concerns the implementation of particular aspects of its ‘Key attributes of effective resolution regimes’ for global systemically important banks (G-SIBs). The ‘Principles on bail-in execution’ consultation proposes a set of principles to assist authorities as they make G-SIB bail-in resolution strategies operational, while the ‘Funding strategy elements of an implementable resolution plan’ consultation builds on the FSB’s August 2016 ‘Guiding principles on the temporary funding needed to support the orderly resolution of a global systemically important bank’ and existing supervisory and resolution guidance on liquidity risk management and resolution planning. Responses are sought by 2 February 2018.

The Single Resolution Board (SRB), an independent European Union (EU) Agency established by the Single Resolution Mechanism Regulation, published its first multi-annual programming report, including its work programme 2018.

Danièle Nouy sets out ECB expectations on non-performing loans

The chair of the supervisory board of the European Central Bank (ECB), Danièle Nouy, gave a speech and written an article in the Financial Times on non-performing loans (NPLs). The speech was delivered at a public hearing in Frankfurt as part of a consultation on the draft addendum to the ECB’s guidance to banks on NPLs. Ms Nouy repeated calls for national governments to speed up out-of-court settlements for NPL resolution, and ensure there are specialised courts and judges to deal with insolvencies.

Now is the time to address secondary markets for NPLs, says EBA chair

Market conditions are ‘extraordinarily favourable’ for sales of non-performing loans (NPLs) as investors search for yield in a low interest environment, according to the chair of the EBA, Andrea Enria. Speaking at the Finest Winter Workshop in Milan, Mr Enria encouraged policy makers to address the ‘opaqueness and liquidity’ of the secondary market for NPLs, in order to take full advantage of this opportunity.

ECB publishes 2017 assessment of bank significance

The ECB released the results of its annual review of the significance of credit institutions for 2017. As a result of increased size, Barclays Bank PLC Frankfurt Branch has been identified as significant and will be directly supervised by the ECB from 1 January 2018. The number of banks directly supervised by the ECB falls to 119.

Risk management and controls

PRA updates remuneration policy statement template

The PRA published an updated Remuneration Policy Statement (RPS) reporting template for PRA Category 1 and 2 firms to use for the 2017 performance year to demonstrate compliance with the requirements.

AFME: cybersecurity needs to be a global and co-ordinated effort

The Association for Financial Markets in Europe (AFME) published an article which addresses the risks of cybersecurity to financial firms. The article references the October 2017 Swift attack, which showed how vulnerable financial firms across the globe are to the machinations of hackers.

Financial crime

Draft MLD4 RTS on group-wide management of ML/TF financing risks

The Joint Committee of the three European Supervisory Authorities (the EBA, EIOPA and ESMA—ESAs) has published its final report on draft joint regulatory technical standards (RTS) on the measures credit institutions and financial institutions shall take to mitigate the risk of money laundering and terrorist financing where a third country’s law does not permit the application of group-wide policies and procedures (JC 2017 25). The RTS will supplement the Fourth Money Laundering Directive (EU) 2015/849 (MLD4).

Four guilty in relation to £1.4m investment scheme

The FCA secured guilty verdicts for Samrat Bhandari and Dr Muhammad Aleem Mirza for their role in operating an investment scheme which led to more than 300 investors losing a total of just over £1.4m. A further defendant, Albene Mendy, was found not guilty. Two brothers, Michael and Paul Moore, pleaded guilty to related offences at a hearing in May 2017.

FCA charges Alex Hope with perverting course of justice

The FCA announced that Alex Hope has been charged with perverting the course of justice, and appeared before the Camberwell Green Magistrates’ Court on 30 November 2017. The proceedings have been transferred to Inner London Crown Court where Mr Hope will appear on 22 December 2017.

EU seeking to bring cryptocurrencies under MLD4

The UK government confirmed that it is currently negotiating amendments to the Fourth Money Laundering Directive that will bring virtual currency exchange platforms and custodian wallet providers into anti-money laundering and counter-terrorist financing (AML/CTF) regulation, which will result in these firms’ activities being overseen by national competent authorities for these areas. The government says it supports the intention behind the amendments and expects the negotiations to conclude at EU level in late 2017/early 2018.

Money laundering and terrorist financing—updated advisory notice

HM Treasury issued an update of its Money laundering and terrorist financing controls in overseas jurisdictions advisory notice. The update is in response to two Financial Action Task Force statements issued on 3 November 2017 and highlights the risks posed by unsatisfactory money laundering and terrorist financing controls in a number of jurisdictions.

The US Justice Department announced a revised Foreign Corrupt Practices Act (FCPA) corporate enforcement policy. The new policy is designed to enable the Department to identify and punish criminal conduct, and provide guidance and greater certainty for companies struggling with the question of whether to make voluntary disclosures of wrongdoing. Deputy Attorney General Rosenstein said in a speech that he expected the new policy to increase the volume of voluntary disclosures and enhance the Department’s ability to identify and punish culpable individuals.

FCA: Using artificial intelligence to keep criminal funds out of the financial system

The head of the Financial Crime Department at the FCA, Rob Gruppetta, delivered a speech at the FinTech Innovation in AML and Digital ID regional event, London, where he discussed the use of artificial intelligence (AI) to keep criminal funds out of the financial system.

FCA executive discusses cyber crime in the financial services sector

The executive director of supervision for investment, wholesale and specialists at the FCA, Megan Butler, delivered a speech at the ICI Global 2017 Capital Markets Conference, in which she said cyber and financial crime in capital markets require an open and co-operative response from both firms and regulators.

Enforcement and redress

FCA fines Bluefin £4m for misleading customers over its ‘independence’

The FCA fined Bluefin Insurance Services Limited (Bluefin) £4,023,800 for inadequate systems and controls, and failing to provide information to its customers about its independence in a way that was clear, fair and not misleading. Between 9 March 2011 and 31 December 2014 the firm held itself out to be ‘truly independent’ in the advice it provided and the insurers it recommended to customers, but was in fact wholly owned by the insurer AXA UK Plc during this time. Bluefin was sold by AXA UK Plc on 31 December 2016.

FRC says it should have done more on HBOS audits

The Financial Reporting Council (FRC) published a report on its enquiries and investigation of the audits undertaken by KPMG Audit plc (KPMG) of the 2007 and 2008 financial statements of HBOS plc (HBOS). In the report, the FRC acknowledges that it should have taken a more proactive role and acted more quickly, rather than relying on other regulators. It also highlights other lessons learnt from its own scrutiny of its work on this matter, its enforcement procedures generally and the commentary of stakeholders.

The Office of the Complaints Commissioner (OCC) published a report concerning alleged mistakes and lack of care by the FCA’s Credit Authorisation Division (CAD) in relation to an authorisation application. As a result of a review, the OCC stated that it was not persuaded that the FCA gave sufficient consideration to the cumulative effect of the identified mistakes and lack of care by CAD and how these would have undermined the cumulative effect of the identified mistakes and lack of care by CAD the firm’s trust in the authorisation process.

Updated data on the FCA’s PPI campaign

The FCA published data on the response to its payment protection insurance (PPI) campaign for 29 August—5 November 2017. The data shows the numbers visiting the FCA’s website, calling its helpline and contacting it on social media during months when it has had live advertising. It also shows how satisfied they were with the services the FCA provided.

MiFID II/MiFIR

ESMA publishes MiFID II/MiFIR key transparency calculations

ESMA published the MiFID II/MiFIR transitional transparency calculations (TTC) for equity and bond instruments. TTC for all asset classes, applicable from 3 January 2018, are therefore now available to market participants, infrastructures and authorities as required under the new regulatory framework. The execution of the TTC has been delegated to ESMA by national competent authorities (NCAs), which have also approved the final calculations published by ESMA.

FCA makes MiFID II changes to Connect system

The FCA made changes to its Connect system which impact on how firms can submit MiFID passport notifications (see webpage: Passporting under MiFID II). All MiFID passport notifications will have to be submitted under the MiFID II legal framework. The changes are necessary in preparation for the implementation of the recast Markets in Financial Instruments Directive (Directive 2014/65/EU) (MiFID II) and the Markets in Financial Instruments Regulation (Regulation (EU) 600/2014) on 3 January 2018.

The director of supervision for investment, wholesale and specialists at the FCA, Megan Butler, delivered a speech setting out the FCA’s expectations on defined benefit to defined contribution (DB to DC) transfer advice, whistleblowing, and the new MiFID II requirements. Ms Butler said encouraging whistleblowing was essential in order to drive out bad practice across the sector, and that although the FCA was on course to see a 5% rise in such reports in 2017, there were fewer whistleblowers coming forward from the advice market than from other sectors, putting investors at risk of losing their savings as a result of poor or dishonest advice.

Council endorses rules on MiFIR derivatives trading

The General Secretariat of the Council of the EU recommended that the Council confirm that it has no objection to the European Commission’s delegated regulation specifying the derivatives that will be subject to the trading obligation under the Markets in Financial Instruments Regulation (MiFIR).

ESMA director speaks on MiFID II and third country frameworks

Verena Ross, executive director of ESMA, gave a speech in which she calls for ESMA to play a central role regarding third country entities active across the EU. In her keynote address at the Asia Securities Industry & Financial Markets Association (ASIFMA) annual conference in Hong Kong, Ms Ross also highlights some of the implications of MiFID II and MiFIR for third country firms.

Markets and Trading

GLEIF publishes ISO 20275: Entity Legal Forms Code List

The Global Legal Entity Identifier Foundation (GLEIF) released the first iteration of ISO 20275: Entity Legal Forms (ELF) Code List, which contains more than 1,600 entity legal forms across more than 50 jurisdictions, each assigned a unique alpha-numeric code of four characters from the basic Latin character set. The ELF Code List is based on the ISO standard 20275 ‘Financial Services—Entity Legal Forms’.

The Bank of International Settlements (BIS) published statistics concerning exchange-traded derivatives. The BIS compiles and publishes one set of statistics on exchange-traded derivatives and two sets on over-the-counter derivatives markets every year.

AFME report on impact of banking reforms on EU capital markets and the real economy

CFTC extends swap data reporting relief

The Commodity Futures Trading Commission (CFTC) issued a no-action letter extending swap data reporting relief for EU, Australian, Canadian, Japanese and Swiss swap dealers (SDs) and major swap participants (MSPs) which do not have an ultimate US parent. The relief has been extended to 1 December 2020, or if earlier, 30 days following the issuance of a comparability determination by the CFTC with respect to the SDR Reporting Rules for the jurisdiction in which the non-US SD or non-US MSP is established.

Investment funds and wealth management

SI 2017/1127: Specified articles of the Regulation on Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs Regulation) are implemented in part. These changes are effective from 1 January 2018.

European Commission adopts RTS on the ELTIF Regulation

The European Commission adopted a regulation with regard to regulatory technical standards (RTS) on financial derivative instruments solely serving hedging purposes, sufficient length of the life of the European long-term investment funds, assessment criteria for the market for potential buyers and valuation of the assets to be divested, and the types and characteristics of the facilities available to retail investors.

HM Treasury published its Investment Management Strategy II, setting out the government’s long-term approach to enhancing the UK’s position as a centre for asset management. The government plans to introduce Asset Management Centres of Excellence to train Britain’s ‘next generation of investment management talent’, and aims to advance the development of FinTech asset management solutions. It will also continue a co-ordinated programme of international engagement to attract overseas firms to locate in the UK and promote UK firms overseas.

Consumer credit, mortgage and home finance

FCA: High-cost credit review—feedback from roundtables

The FCA published a paper summarising feedback raised by participants in its roundtables discussing the high-cost credit sector. On 31 July 2017 the FCA published a feedback statement (FS17/2) which set out its priorities for the next stage of its review of businesses that offer high-cost credit. The FCA hosted three roundtables in September and October 2017 to discuss the alternatives to high-cost credit and the provision of essential goods.

FCA reports on consumer experience of unauthorised lenders

The FCA published a report on its research into consumers’ experience of borrowing money from unauthorised lenders, otherwise known as loan sharks. The report summarises what the FCA was told by its consumer network partners, and includes some insights from individuals directly affected by what is commonly known as illegal money lending.

Insurance and pensions

Risk Transformation Regulations 2017

SI 2017/1212: A new regulatory and supervisory framework for Insurance Linked Securities (ILS) is implemented in the UK from 8 December 2017. The framework is designed to attract ILS business to the UK. The Regulations create a new form of regulated activity under the Financial Services and Markets Act 2000 for ILS. They also enable the creation of a new form of body corporate called a ‘protected cell company’ to act as a special purpose vehicle in ILS transactions.

IAIS consults on index-based insurances

The International Association of Insurance Supervisors (IAIS) is consulting on a draft issues paper on index-based insurances, which are increasingly being seen as a way to manage weather and catastrophic events, support food security and enhance access to insurance. The paper provides background on the product, describes practices and actual examples, and identifies related regulatory and supervisory issues and challenges. Responses are sought by 29 January 2018.

FCA and government announce success in cutting pension scheme charges

The FCA reported that actions it has taken in collaboration with the Department for Work and Pensions, pension providers, the independent governance committees (IGCs) and trustees, have resulted in lower costs and charges to consumers on about £24.9bn in workplace pension schemes. The FCA says it has written to all providers that participated in its progress review, setting out its clear expectation that they will continue to ensure that customers are not exposed to high costs and charges that are poor value for money, and that they engage on an ongoing basis with their IGCs, trustees and members as appropriate to achieve this.

FCA advises consumers on how to protect their pension pots

The FCA published advice for consumers on protecting pension pots from scams and risky investments, based on its previous consumer alert from August 2014. It sets out questions consumers should consider before transferring funds to a new scheme, and warns against taking action based on cold calls or free pension reviews. It recommends that consumers seek impartial advice from a financial adviser unconnected to the firm that contacted them before investing in unregulated investments.

European Scrutiny Committee not satisfied that PEPP offers value to UK consumers

The House of Commons European Scrutiny Committee considered the European Commission’s proposal for a Regulation on a pan-European Personal Pension Product (PEPP), and says it is not satisfied that the proposal offers much added value for UK consumers.

Payment services and systems

The Department for Business, Energy & Industrial Strategy published guidance on the Consumer Rights (Payment Surcharges) Regulations 2012 2012/3110 in the amended form which will take effect on 13 January 2018. The amendments were made by the Payment Services Regulations 2017 and implement provisions of the second Payment Services Directive 2015/2366/EC (PSD2).

SI 2017/1173: Amendments are made to exercise a power inserted into the Financial Services and Markets Act 2000 by the Digital Economy Act 2017 (DEA 2017), which enables the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 to cover non-bank payment institutions. The regulations come into force on 22 December 2017 and on 13 January 2018.

Banking Act 2009 (Service Providers to Payment Systems) Order 2017

SI 2017/1167: The Bank of England (BoE) is enabled to supervise service providers to systemically important payment systems.

Data-gathering Powers (Relevant Data) (Amendment) Regulations 2017

SI 2017/1175: These Regulations amend the Data-gathering Powers (Relevant Data) Regulations 2012 to specify the relevant data which money service businesses may be required to provide to HMRC on receipt of a data-holder notice under Schedule 23 to Finance Act 2011. These regulations come into force on 21 December 2017.

Interchange fees case dismissed (Sainsbury’s v Visa)

A judgment been handed down in proceedings brought by Sainsbury’s against Visa. Sainsbury’s had sought a declaration that the Multilateral Interchange Fees (ie the interchange fees paid by the acquirers and passed on to the merchants such as VISA) set by Visa for transactions in the UK were unlawful as being contrary to Article 101 of the Treaty on the Functioning of the European Union 2012/C 326/01, which is of direct effect, and its domestic equivalent, section 2 of the Competition Act 1998. Sainsbury’s Supermarkets Ltd v Visa Europe Services LLC and others [2017] EWHC 3047 (Comm).

ECB publishes speech on the digital transformation of the retail payments ecosystem

The ECB published details of a speech given by Yves Mersch, a member of the executive board of the ECB, at the Joint ECB and Banca d’Italia conference in Rome. Mr Mersch focused on instant payments and briefly discussed the private cryptocurrency schemes which do not have an identifiable issuer.

Fintech and virtual currencies

The Chicago Mercantile Exchange Inc (CME), the CBOE Futures Exchange (CFE) and the Cantor Exchange (Cantor) agreed with the US Commodity Futures Trading Commission (CFTC) to significant enhancements to its proposed self-certified new contracts for bitcoin futures products and bitcoin binary options to protect customers and maintain orderly markets.

Successful firms revealed for third round of FCA’s sandbox

The FCA announced that 18 firms have been successful in their applications to begin testing in the third cohort of the sandbox, which allows firms to test innovative products, services or business models in a live market environment, while ensuring that appropriate protections are in place. The FCA is now accepting applications from firms for the fourth sandbox phase. Firms have until 31 January 2018 to submit their applications.

OECD publishes report on technology and pensions

A report which explores the early regulatory implications of the growing role of technology in pension provision, and looks at what governments are doing more generally to support its development for the benefit of consumers, has been published by the OECD.

Deadline for responses to the European Commission’s proposed Commission Delegated Regulation supplementing the Securities Financing Transactions Regulation (Regulation (EU) 2015/2365) (SFTR) with regard to the fees charged by ESMA to trade repositories.

]]>http://blogs.lexisnexis.co.uk/fs/weekly-highlights-7-december-2017/feed/0http://blogs.lexisnexis.co.uk/fs/weekly-highlights-7-december-2017/Weekly highlights—30 November 2017http://feedproxy.google.com/~r/FinancialServicesBlog/~3/89qcBgtdSGc/
http://blogs.lexisnexis.co.uk/fs/weekly-highlights-30-november-2017/#respondThu, 30 Nov 2017 17:52:20 +0000http://blogs.lexisnexis.co.uk/fs/?p=7965Read More...]]>Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 30 November 2017.

Brexit

Legislative amendments proposed on relocation of EMA and EBA from London

The European Commission made two legislative proposals to amend the founding Regulations of the European Medicines Agency (EMA) and the European Banking Authority (EBA). This follows an agreement by the EU27 leaders to move the EMA and the EBA from London to Amsterdam and Paris, respectively. The proposals are strictly limited to confirming the new seats of the agencies in the two founding Regulations.

EU Scrutiny committee examines Brexit’s impact on financial services

The House of Commons European Scrutiny Committee produced a report on Brexit and the UK’s financial services sector, interim arrangements, and the possibility of a ‘cliff-edge’ departure. The report also discusses the status of EU legislative proposals on resolution and recovery, and capital requirements.

Lords’ EU Financial Affairs Sub-Committee heard from FCA and Barclays

On 29 November 2017, the House of Lords EU Financial Affairs Sub-Committee heard evidence from the Financial Conduct Authority (FCA)’s CEO, Andrew Bailey and the chair of Barclays, John McFarlane.

LMG proposes mechanism to enable the EU and UK to maintain insurance markets access and regulatory control post-Brexit

The London Market Group (LMG) published a proposal for the UK government that sets out a mechanism that would enable the EU and UK to maintain access to their insurance markets and control over their respective regulatory systems, once the UK leaves the EU.

Financial Conduct Authority updates

Minutes available of FCA October 2017 board meeting

The FCA published the minutes of a board meeting held in London on 18 and 19 October 2017. The board discussed the Delivering Effective Supervision project, with its vision of pre-emptive and collaborative supervision using proven project methodology, milestones and deadlines, and noted the importance of understanding individual firms’ culture, governance arrangements and business models, as this is the backdrop to many of the issues which arise in firms.

Regulatory architecture

Benoît Cœuré, a member of the executive board of the European Central Bank (ECB), said that central banks have made significant progress in integrating big data into their policy analysis and decision-making. However, speaking at a conference on ‘Economic and financial regulation in the era of big data’ in Paris, Mr Cœuré warned that the use of such data presents operational challenges, as well as analytical, legal and ethical concerns.

The Chancellor of the Exchequer, Philip Hammond, replied to a letter from the chair of the Treasury Select Committee, Nicky Morgan MP, in which Ms Morgan sought information about diversity amongst senior appointments made by the Treasury to the Bank of England. Mr Hammond said that out of six appointments made since 2016, three were male and three female, but he acknowledged ‘the broader challenge of improving diversity at all stages of the process for senior appointments’.

Nicky Morgan comments on the Autumn 2017 Budget

The chair of the Treasury Select Committee, Nicky Morgan MP, said Philip Hammond’s Autumn 2017 Budget was ‘a common-sense approach, with a welcome emphasis on issues beyond Brexit’. The Committee will begin scrutiny of the measures contained in the Budget shortly, with a report to be published in early 2018.

Lord Burnett welcomes legal sector innovation

The Right Honourable the Lord Burnett of Maldon delivered a speech at the launch of TheCityUK’s Legal Services Report 2017. Lord Burnett highlighted several legal innovations mentioned in the report, including the introduction of the financial list, the financial markets test case scheme and the shorter and flexible trials pilot scheme. He also welcomed the establishment of Business and Property Courts, which bring together judicial expertise in finance, business and markets, property, intellectual property, and technology and construction law.

The Financial Stability Board (FSB)’s regional consultative group (RCG) for Asia met in Sydney, where it discussed vulnerabilities in the global financial system, including complacency in global markets about risks and their potential impact on Asia, and the decline of correspondent banking. Discussing FinTech, e-payments and the regulation of virtual currencies, the RCG noted the need to balance financial innovation and financial stability through risk-focused, proportionate regulatory approaches.

Prudential requirements

The European Commission published a report (COM (2017) 661 final) to the European Parliament and the Council of the EU on the review of Articles 13 (Group Resolution Plan), 18 (Impediment to resolvability: group treatment) and 45 (MREL) as regards the EBA’s powers to conduct binding mediation to take account of future developments in financial services law.

EBA withdraws guidelines on retail deposits subject to different outflows for liquidity reporting under CRR

The EBA decided to formally repeal its December 2013 guidelines on the criteria for identifying retail deposits subject to different outflows for the purpose of liquidity reporting under the Capital Requirements Regulation (Regulation (EU) 575/2013) (CRR). The guidelines have been superseded by the Liquidity Coverage Ratio (LCR) Delegated Regulation ((EU) 2016/322) (which became applicable in September 2016) and are no longer applicable for liquidity reporting purposes.

Amendments to CRR own funds requirements published in the Official Journal

Commission Delegated Regulation (EU) 2017/2188 of 11 August 2017 amending the CRR as regards the waiver on own funds requirements for certain covered bonds was published in the Official Journal of the EU. The regulation shall enter into force on the twentieth day following its publication. It shall apply from 1 January 2018.

UK banks pass BoE stress test

The Bank of England (BoE) published its November 2017 financial stability report, focusing on the results of the annual stress test, and concluding that the UK financial system is resilient to a ‘very broad range of risks’, that banks are strong enough to keep lending in a scenario more severe than the financial crisis, and that they are three times stronger than they were ten years ago. The stress test included deep recessions in the UK and abroad, large falls in asset prices, and large fines for past misconduct. The BoE also announced that it is raising the UK countercyclical capital buffer (CCyB) rate from 0.5% to 1% to lock in banks’ resilience.

EBA publishes its 10th report on risks and vulnerabilities in the EU banking sector

The EBA published its risks and vulnerabilities report, together with the 2017 EU-wide transparency exercise, which provides key data for 132 banks across the EU. The data shows improved resilience in the EU banking sector, in a benign macroeconomic and financial environment, but NPLs, cybersecurity, and the long-term sustainability of current business models are areas of concern.

In its biannual Financial Stability Review, the ECB found that systemic stress indicators for the euro area have remained low over the past six months. Better growth prospects as well as lower fiscal and external imbalances contributed to reduced systemic stress indicators for the euro area.

ECB review finds banks are working hard to implement IFRS 9

The ECB published the findings of a thematic review on International Financial Reporting Standard (IFRS) 9, assessing the preparedness of institutions for implementing the standard. According to the ECB, banks in the euro area are working intensively to implement IFRS 9, which enters into force on 1 January 2018. The report also outlines key supervisory expectations for the ongoing implementation and application of IFRS 9.

ECB chair tells EU banks to adapt, consolidate and reduce NPLs

The chair of the supervisory board of the ECB, Danièle Nouy, said that euro area banks need to adapt to a complex and changing environment, while acting in a sustainable manner. Speaking at the 2017 Handelsblatt conference on European banking regulation in Frankfurt, Ms Nouy called for more consolidation of the European banking sector and said that European banks must do more to tackle the problem of non-performing loans (NPLs).

Risk management and controls

Challenges of data protection certification in the GDPR identified

The European Union Agency for Network and Information Security (ENISA) warned that data protection mechanisms in the upcoming General Data Protection Regulation, 2016/679/EU (GDPR), should not only focus on whether measures are in place or not, but also on to what extent such measures are sufficient in ensuring compliance with the regulation’s provisions. ENISA’s latest report, in which this finding appears, was created to clarify the terminology of certification and other relevant concepts within GDPR certification, and give recommendations about certification for the future.

FCA’s remuneration review reflects continued focus on firm culture

The FCA published a letter dated 31 August 2017 that it sent to remuneration committee (RemCo) chairs outlining the FCA’s findings and observations from the 2016/17 annual remuneration round. The letter also provides information regarding the FCA’s approach to the supervision of remuneration for 2017/18.

Financial crime

Asia-Pacific alliance for sharing financial crime intelligence

At the third Counter-Terrorism Financing (CTF) Summit held in Kuala Lumpur between 20-23 November 2017, an alliance of Asia-Pacific countries agreed to build an information hub to share financial crime intelligence to combat the terrorism financing risks posing a threat to the region.

FCA publish final summary of RBS GRG skilled person’s report

The FCA published the final version of its summary of the independent skilled person’s review of RBS’s treatment of small and medium-sized enterprise customers transferred to its Global Restructuring Group (GRG). This version contains a number of drafting changes as recommended by the specialist advisors to the Treasury Select Committee, who were asked by the committee to assess whether the FCA’s interim summary was a fair and balanced account of the findings of the skilled person’s report.

Markets and trading

MiFIR package order rules published in the Official Journal

Commission Delegated Regulation (EU) 2017/2194 of 14 August 2017 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments (MiFIR) with regard to package orders was published in the Official Journal of the EU.

ESMA publishes results of MiFID compliance function peer review

The European Securities and Markets Authority (ESMA) published the results of its peer review on the guidelines on certain aspects of the compliance function under the Markets in Financial Instruments Directive 2004/39/EC (MiFID). The guidelines cover national competent authority (NCA) supervision of investment firms’ compliance functions, and particularly how those functions carry out risk assessments, monitor compliance obligations, report to senior management and fulfil their advisory role. The review found a high level of compliance by the majority of EEA NCAs, although significant weaknesses were identified in the supervisory approaches of Cyprus, Iceland and the Netherlands.

Council of the EU makes compromise proposal on EMIR amendment

The Council of the EU issued a compromise text on the proposal for a Regulation amending Regulation (EU) No 649/2012 (EMIR).

ECB consults on new unsecured overnight interest rate

The ECB is seeking views on the high-level features of a new unsecured overnight interest rate. The consultation document provides an overview of the factors supporting the ECB’s decision to publish an unsecured overnight rate and aims to collect stakeholders’ feedback on the design features and timing of publication of the new rate. Responses are sought by 12 January 2018.

ECB publishes euro risk-free rates working group’s terms of reference

The ECB launched a call for expressions of interest to participate in the working group on Euro risk-free rates for the euro area. This call is also being issued on behalf of the Belgian Financial Services and Markets Authority (FSMA), ESMA and the European Commission. Financial sector representatives and non-banking institutions or associations will be invited to join or contribute to the new working group. The ECB has also published the working group’s terms of reference, and its work will be guided by them.

The governing council of the ECB adopted Decision ECB/2017/37 amending Decision ECB/2014/40 on the implementation of the third covered bond purchase programme (CBPP3). The amendment, which enters into force on 1 February 2018, reflects the decision adopted by the governing council on 4 October 2017 to exclude conditional pass-through covered bonds from purchases under the CBPP3 if they are issued by an entity with a first-best issuer rating below Credit Quality Step 3.

The European Supervisory Authorities (ESAs) released a statement saying that in light of challenges for certain counterparties (CCPs) to exchange variation margin for physically-settled FX forwards by 3 January 2018, they are conducting a review of the requirements. However, any changes to the EU rules will need to be implemented through legislation. In the meantime, they encourage national supervisors to enforce the requirements in a proportionate manner.

Derivatives body calls for extension of transitional provisions under CRR

The Futures Industry Association (FIA) welcomed the European Commission’s ongoing efforts to deliver positive equivalence determinations for jurisdictions where third-country CCPs, which provide services to EU firms, are established. The FIA also proposes an extension of transitional provisions under the CRR, saying it is critical to ensure continuous access to these markets whilst outstanding equivalence decisions are made.

FCA updates list of position limits for commodity derivative contracts

The FCA published a further set of position limits on commodity derivative contracts which are traded on UK trading venues. The list includes bespoke and de minimis commodity derivative contracts which are aggregated for position limit purposes and their venue product codes (VPCs). The limits will apply from 3 January 2018 to positions held in the spot month and the other months’ periods for each commodity derivative.

Bank and FCA announce the launch of the next phase of sterling Libor transition work

The BoE and the FCA issued a press release announcing the next phase of work with market participants on Libor transition. From January 2018, the market-led working group on sterling risk-free rates will have an extended mandate and broader participation.

FCA confirms panel banks will support Libor until 2021

The FCA announced that all 20 panel banks will continue to support the Libor benchmark until 2021, when a transition will be made to alternative rates. Based on this support, the FCA now expects the focus to shift towards developing alternative rates and working towards a smooth transition.

Central banks express commitment to FX Global Code

Fifteen central banks in the European System of Central Banks (ESCB), including the ECB, simultaneously issued Statements of Commitment to the Foreign Exchange Global Code of Conduct. The remaining ESCB central banks will do so in 2018. The ECB says the statements demonstrate commitment to adhering to the principles of the Code when acting as foreign exchange market participants and ensuring that their internal practices and processes are aligned with the principles of the Code.

ESMA published two sets of Central Securities Depositories (CSD) Regulation compliance tables. The tables cover the guidelines on participant default rules and procedures under Regulation (EU) No 909/2014 (ESMA70-151-294), and the guidelines on CSD access to the trading feeds of central counterparties and trading venues (ESMA70-151-298). All Member States, territories and EEA/EFTA states comply or intend to comply with each set of guidelines.

Mark Carney says good progress made in reforming FICC markets

The governor of the BoE, Mark Carney, delivered a speech assessing the progress of the Fair and Effective Markets Review (FEMR), two and a half years after it set out a series of ‘ambitious’ recommendations to restore confidence in fixed income, currency and commodities (FICC) markets. The review was a response to the series of post-crisis scandals in FICC markets, where misconduct was revealed on a scale that, said Mr Carney, impaired their ability to function fairly and effectively. Mr Carney said the FICC Market Standards Board (FMSB) had already made an important contribution in establishing common standards of market practice that are well understood, widely followed and dynamically relevant.

FSB publishes responses to UPI governance consultation

The FSB published responses to its consultation on proposed governance arrangements for the unique product identifier (UPI). The consultation was launched in October 2017 and closed on 17 November 2017. The FSB expects to publish conclusions from the consultation in 2018.

Investment funds and wealth management

IOSCO publishes good practices for the termination of investment funds report

The International Organization of Securities Commissions (IOSCO) published a report which sets out good practices on the voluntary termination process for investment funds, ie collective investment schemes and other fund structures such as commodity, real estate and hedge funds.

IOSCO publishes report on fourth hedge funds survey

IOSCO published the final version of its report on the fourth biannual hedge funds survey. IOSCO says the surveys help it gain a better insight into the global hedge fund industry, promote global co-operation on possible risks in the sector, and provide a forum for the discussion of potential regulatory options or recommendations if required. This one draws on data as of 30 September 2016.

Feedback on proposed EU crowdfunding and P2P framework

The European Commission published feedback received on its inception impact assessment on a proposal for an EU framework on crowd and peer-to-peer (P2P) finance, issued in October 2017. Feedback was provided by 41 bodies, including HM Treasury and the UK Crowdfunding Association.

Rocker v Full Circle Asset Management

The defendant had acted in breach of mandate over nine monthly periods, as the actual risk profile of the claimant’s portfolio had exceeded that agreed. The Queen’s Bench Division further held that the defendant had also breached its contractual obligation to operate a stop loss policy under which it was required automatically sell any investment if that investment made a loss of 5%. The judgment is available at: [2017] EWHC 2999 (QB).

Banks and mutuals

The FCA reports on the compliance function in wholesale banks

The FCA published a report on the compliance function in wholesale banks. The report summarises what the FCA was told during a review of the compliance function in wholesale banks, as well as making some of its own observations.

Credit Unions Act 1979 (Locality Common Bond Conditions) Order 2017

SI 2017/1144: a change is made to section 1B(3)(a) of the Credit Unions Act 1979 to increase the number of potential members of a credit union for the locality common bond from two million to three million. This change is effective from 6 April 2018.

Consumer credit, mortgage and home finance

Goods Mortgages Bill could replace outdated Bills of Sale Acts

The Law Commission published its final draft of the Goods Mortgages Bill, which is intended to replace the Bills of Sale Acts to govern how individuals use existing goods as security. The Commission recommends the Acts be repealed in their entirety, and recommends among other things that a goods mortgage should be a ‘charge’, rather than a transfer of ownership.

Insurance and pensions

Regulations amending Solvency II ITS published in the Official Journal

Two regulations amending and correcting implementing technical standards (ITS) relating to Directive 2009/138/EC of the European Parliament and of the Council (Solvency II) were published in the Official Journal of the EU:

Commission Implementing Regulation (EU) 2017/2189 of 24 November 2017 amending and correcting Implementing Regulation (EU) 2015/2450 laying down ITS with regard to the templates for the submission of information to the supervisory authorities according to Solvency II, and

IAIS sets out guidance on product oversight in inclusive insurance

The International Association of Insurance Supervisors (IAIS) published an application paper on ‘Product oversight in inclusive insurance’, containing guidance for supervisors, regulators and policymakers when considering, designing and implementing regulations and supervisory practices on product oversight in inclusive insurance markets. The IAIS says effective oversight of products which are offered to customers is fundamental to maintaining fair, safe and stable insurance markets and a key responsibility and activity of the insurance supervisor.

IAIS extends ICPs consultation deadline

The IAIS extended the deadline for responding to its public consultation on the draft revised Insurance Core Principles (ICPs) 8, 15 and 16, the ComFrame material integrated with these ICPs, and the proposed definitions of enterprise risk management-related terms. The consultation was launched on 8 November 2017.

FCA publishes consumer warning on Larksway Investments Limited

The FCA published a consumer warning stating that it has stopped Larksway Investments Limited (Larksway) from providing insurance brokerage services to customers. This means Larksway cannot arrange insurance for customers and cannot provide insurance services to existing customers.

IAIS Newsletter November 2017 edition

The IAIS published the November edition of its newsletter following its annual conference in Kuala Lumpur. This edition touches on the IAIS’s projects to further promote a more stable global financial system.

EIOPA elects InsurTech task force chair

EIOPA announced that Kathleen Köhn has been elected by the EIOPA board of supervisors as chair of EIOPA’s InsurTech task force. Ms Köhn is a senior officer in the insurance and pension fund supervision department at the German Federal Financial Supervisory Authority.

Payments services and systems

ECB 2016 Eurosystem oversight report

The ECB published its 2016 Eurosystem oversight report. The Eurosystem comprises the ECB and the national central banks (NCBs) of those countries that have adopted the euro. The report summarises the Eurosystem’s work in pursuing the conduct of oversight, as one of its basic functions, to promote the safety and efficiency of payment, clearing and settlement systems, with a particular focus on the safety (resilience) aspect at both euro area level and beyond. The Eurosystem also carried out oversight of payment instruments, as their usage requires a high degree of safety and efficiency to maintain confidence in the euro and promote an efficient economy.

PSD2 RTS on strong customer authentication and common and secure communication

The European Commission adopted a Delegated Regulation supplementing the revised Payment Services Directive (2015/2366/EU) (PSD2) with regulatory technical standards (RTS) for strong customer authentication and common and secure open standards of communication.

A European Commission report on the application of the Single Euro Payments Area Regulation (SEPA) concluded that it is being correctly applied across the EU and there is currently no need for a follow-up legislative proposal. The report does, however, identify IBAN discrimination by payees as an area to be ‘closely observed’.

The chair of the Treasury Select Committee, Nicky Morgan MP, wrote to the chair of LINK, the cash machine network, seeking assurances that the proposed 20% reduction of the interchange fee, which funds free-to-use ATMs, will preserve the existing geographic spread of ATMs, and will have no negative impact on financial inclusion.

FCA director on PSD2 and the strategic review of retail banking

The director of retail banking supervision at the FCA, Karina McTeague delivered a speech on retail banking, payment systems and PSD2. Speaking at the Westminster Business Forum on retail banking and payments, Ms McTeague said the FCA is working with HM Treasury, the EBA and the Open Banking Implementation Entity to update the existing regulatory regime for PSD2, and is currently in the evidence-gathering stage of the strategic review of retail banking.

FinTech and big data will shake up retail banking

The FCA published a speech given by its executive director of strategy and competition, Christopher Woolard, at the Future of Retail Banking 2017 conference. The speech focused on PSD2 and the Open Banking standard on data sharing, which together will allow big data and financial services to come together for the first time in the retail space, and the regulator’s ambitions for retail banking in this changing environment.

Dates for your diary

Date

Topic

Event

1 December 2017

Payment services and systems

Deadline for responses to the governments consultation on legislation for two measures to support the introduction of the image clearing system (ICS) for cheques.

Brexit

The House of Commons International Trade Committee (ITC) published the government’s response to the ITC’s March 2017 report into UK trade options beyond 2019 following Brexit. In relation to trade in financial services, in recommendation 9, the report stated that the government should seek the nearest achievable approximation to passporting and in recommendation 14 that there should be a plan in place for transitional arrangements to ensure that passporting in financial services will not come to a sudden end. The report also sought clarity in recommendation 10, regarding how complex disputes in the financial sector would be resolved without the involvement of the European Court of Justice (ECJ).

In a speech to the Centre for European Reform on the future of the EU, the EU’s chief Brexit negotiator, Michel Barnier, underlined the desire for the EU27 to seek a ‘close relationship with the UK’ once Brexit happens. Barnier spoke about building a ‘stronger’ EU and addressed matters such as the Eurozone, Ireland and the single market, highlighting in particular that, while the UK will lose the benefits of the single market, the EU ‘does not want to punish’.

ECB critical of banks’ ’empty shell’ Brexit relocation plans

The European Central Bank (ECB) reprimanded several banks for seeking to move some of their regulated services from the UK to the EU as a result of Brexit on the basis that their banking applications were inadequate as they involve setting up ’empty shell’ operations in the EU that are not properly staffed.

EBA welcomes decision on new location

The EBA welcomed the Council of the EU’s decision on its relocation to Paris, given the UK’s intention to withdraw from the EU. The EBA says the decision reassures its staff over the new location and puts an end to a period of uncertainty.

UK Finance published a report proposing an alternative model for a future trade framework for banking and capital markets services between the EU and the UK. The report says the model is ‘both robust and flexible’.

ISDA webinar on Brexit—an update and implications for derivatives

The International Swaps and Derivatives Association (ISDA) published a webinar update on the implications of Brexit for the derivatives market. The webinar covers the current state of UK/EU negotiations, the UK’s European Union Withdrawal Bill, and central counterparty supervision and location policy.

Financial Conduct Authority updates

FCA Regulation round-up—November 2017

The Financial Conduct Authority (FCA) published the November 2017 edition of its regulation round-up. Topics discussed include the first of its Approach documents—the FCA’s Future Approach to Consumers. The round-up also includes details about the terms of reference for the FCA’s wholesale insurance broker market study, as well as the publication by the Treasury of its update to the National Risk Assessment (NRA) of money laundering and terrorist financing.

The FCA announced details of the first set of regional events taking place in 2018 for regulated mortgage and general insurance firms, as part of its Live & Local programme.

Regulatory architecture

Autumn Budget 2017—Financial Services

The Chancellor of the Exchequer announced several measures relevant to financial services, including an expansion of the Open Banking initiative and a new strategy for the UK investment management industry in the Autumn Budget 2017. The government says it is committed to supporting competition in banking, and the Autumn Budget set out several actions which are intended to promote innovation in banking services, strengthen challenger banks, and improve access to affordable credit for consumers.

Joint Committee of ESAs publishes 2018 work programme

The Joint Committee of the European Supervisory Authorities (ESAs) released its work programme for 2018, setting out the ways the European Insurance and Occupational Pensions Authority (EIOPA), the EBA and the European Securities and Markets Authority (ESMA) will work together. The Committee says it will continue to focus its work on consumer protection issues such as supporting the implementation of the new Packaged Retail and Insurance-based Investment Products (PRIIPs) rules, analysing the adequacy of cross-border supervision of financial services, and FinTech developments.

ESMA chair discusses priority topics for 2018

The chair of ESMA, Steven Maijoor, delivered a speech on ESMA’s priorities for 2018, in which he discussed costs and charges of investment funds, investment fund stress testing, and supervisory convergence in the context of Brexit.

Valdis Dombrovskis outlines forthcoming proposals

The vice-president of the European Commission, Valdis Dombrovskis, spoke on the EU’s ‘two flagship projects’—banking union and capital markets union—and sketched out forthcoming proposals to help strengthen the single currency ‘in the face of unforeseen challenges’. Mr Dombrovskis said further integrating financial markets would help to absorb shocks through private risk-sharing, better protect taxpayers from having to pay for the mistakes of the banking sector, and reduce the need for public risk-sharing within the Economic and Monetary Union.

ECB executive discusses NPLs, Brexit and risk management

The ECB published a speech by Sabine Lautenschläger, a member of its executive board and vice-chair of its supervisory board, in which she discussed non-performing loans (NPLs), Brexit, and risk management. Ms Lautenschläger called on the banks to devise ambitious, realistic and credible plans to get rid of their NPLs and suggested now was the time to do so as economic conditions were fair. Concerning Brexit, Ms Lautenschläger warning to the banks was stark: ‘Don’t procrastinate. No one will wait for you’.

BIS reactivates the FSI Advisory Board

The Bank for International Settlements (BIS) announced that it has decided to reactivate the Financial Stability Institute (FSI) Advisory Board that was originally created in 1998 (and ceased to operate some time later) to help achieve closer interaction with central banks and financial supervisory agencies, which are its main stakeholders.

Lords pass Financial Guidance and Claims Bill with amendments

The Financial Guidance and Claims Bill received its third reading by the House of Lords on 21 November 2017. The Lords passed the Bill with a number of amendments and sent it to the Commons for its consideration. Among other things, the amendments envisage the creation of a debt respite scheme and call for a fee cap for claims management services provided in connection with a payment protection insurance (PPI) claim.

Authorisation, approval and supervision

FCA updates information on cancelling authorisations

The FCA updated its webpage giving information on how to cancel an authorisation.

Law Society responds to the FCA consultation on extension of the SM&CR regime

The Law Society published a response to the FCA’s consultation on Individual accountability: Extending the Senior Managers & Certification Regime (SM&CR) to all FCA firms. The Law Society remains strongly of the view that the legal function should be excluded from the scope of the SM&CR.

Prudential requirements

ESMA issues final report on the Money Market Funds Regulation

ESMA published a final report on the Money Market Funds Regulation (EU) 2017/1131 (MMF Regulation), containing final versions of the technical advice, draft implementing technical standards (ITS), and guidelines on stress test scenarios carried out by MMF managers under the MMF Regulation. The key requirements relate to asset liquidity and credit quality, the establishment of a reporting template and stress test scenarios carried out by MMF managers.

EBA publishes final guidelines on risk parameters under the IRB approach

The EBA published its final guidelines on the estimation of risk parameters for non-defaulted exposures. The guidelines cover the probability of default (PD) and the loss given default (LGD) and the treatment of defaulted exposures under the advanced IRB Approach, including estimation of parameters such as ELBE and LGD in-default. The guidelines, which are part of the EBA’s regulatory review of the IRB approach, aim to restore market participants’ trust in internal models by reducing the unjustified variability in their outcomes, ensuring comparability of risk estimates while at the same time preserving risk sensitivity of capital requirements.

Council of the EU publishes Commission Delegated Regulation on RTS for valuation difference in resolution

The Council of the EU published a draft Commission Delegated Regulation supplementing the Bank Recovery and Resolution Directive (Directive 2014/59/EU) (BRRD) on the regulatory technical standards (RTS) specifying the methodology for the valuation of the difference between the treatment that shareholders or creditors of an institution under resolution have received, and the treatment they would have received had the institution entered normal insolvency proceedings.

Council of the EU publishes Commission Delegated Regulation on RTS for valuation of assets and liabilities in a resolution scenario

The Council of the EU published a draft Commission Delegated Regulation supplementing the BRRD on the RTS specifying the criteria relating to the methodology for assessing the value of assets and liabilities of institutions or entities. The RTS set out the methodology to be used for valuation in a resolution scenario.

EBA publishes methodology for the 2018 EU-wide stress test

The EBA published its final methodology for the 2018 EU-wide stress test. The methodology covers all relevant risk areas and, for the first time, incorporates IFRS 9 accounting standards. The stress test exercise will be formally launched in January 2018, with the results to be published by 2 November 2018.

FSB publishes 2017 G-SIB list

The Financial Stability Board (FSB) published the 2017 list of global systemically important banks (G-SIBs), using end-2016 data and an assessment methodology designed by the Basel Committee on Banking Supervision (BCBS). The list still comprises 30 banks, but with Royal Bank of Canada joining and Groupe BPCE having been removed.

EBA presentation on draft ITS on supervisory information under CRD IV

The EBA published a presentation given at a public hearing on 17 November 2017 on draft ITS amending Commission Implementing Regulation (EU) 650/2014 on the format, structure, contents list and annual publication date of the supervisory information to be disclosed by competent authorities in accordance with Article 143(3) of the Capital Requirements Directive 2013/36/EU (CRD IV).

EBA: good progress on supervisory convergence but challenges remain

The EBA published its third annual report on the convergence of supervisory practices across the EU. The report reviews consistency in the application of the Supervisory Review and Evaluation Process (SREP) in order to promote comparable supervisory approaches and consistency in supervisory outcomes across the single market.

EBA presentation on its review of the resolution reporting ITS

The EBA published a presentation on its review of the implementing technical standards on reporting for resolution plans, delivered at a public hearing on 26 September 2017.

How to serve the PRA with written statements on ring-fencing transfer schemes

The Prudential Regulation Authority (PRA) published a webpage providing information about how to serve the PRA with copies of written statements to a firm’s ring-fencing transfer scheme (RFTS).

Thematic reviews aim to improve corporate reporting and auditing

The Financial Reporting Council (FRC) announced that, in 2018/19, it will supplement its routine monitoring programme with a series of thematic reviews of corporate reports and audits. The objective of the supplementary reviews is to stimulate improvement in corporate reporting and auditing.

EBA updates list of CET1 instruments

The EBA published its sixth updated list of capital instruments that competent authorities across the EU have classified as Common Equity Tier 1 (CET1). The list was last updated in May 2017.

Risk management and controls

Investigation opened into Mitie Group plc’s reports and accounts

The FRC opened an investigation in relation to the preparation and approval of the financial statements for Mitie Group plc for the year ended 31 March 2016. The FRC also has an ongoing investigation in relation to the conduct of Deloitte LLP’s audit of Mitie under the audit enforcement procedure.

FCA COO discusses cyber security in the financial services industry

The chief operating officer at the FCA, Nausicaa Delfas, delivered a speech on how to address cyber issues within firms at the Cyber Security Summit and Expo 2017. Ms Delfas said the FCA’s role was to help firms to become more resilient to cyber attacks, to enhance market integrity and to protect consumers, but she also pointed out that cyber resilience is in a sense ‘beyond compliance’—it should be business led.

ECB executive discusses cyber resilience and the Eurosystem

The director general for market infrastructure and payments at the ECB, Marc Bayle de Jessé, delivered a speech setting out the ECB’s views on the regulation of cyber security. Mr Bayle de Jessé warned that if the European system of central banks or the financial ecosystem were compromised, it could not only cause disruption but potentially undermine confidence in the financial system, majorly impact the Eurosystem’s reputation and affect financial stability.

ECB speech looks at the role of the internal auditor

The ECB published the text of a speech by a member of its supervisory board, Pentti Hakkarainen, on the role of internal auditors in ensuring sound governance, setting out how supervisors and internal auditors can work together.

Financial crime

The Sanctions and Anti-Money Laundering Bill, the first Brexit bill to be scrutinised by the House of Lords, contains inappropriately broad powers for ministers, the Lords Constitution Committee warned. The Committee is particularly concerned by a provision under the Bill which allows ministers to create criminal offences punishable by up to ten years’ imprisonment, while also setting the rules on evidence consideration and defence to those offences.

A woman has been jailed for six years and three months after being convicted of four counts of money laundering at Kingston Crown Court. A National Crime Agency (NCA) investigation found she was part of a Chinese money laundering group which paid more than £1.8m in criminal cash into London high street banks between 30 July and 15 August 2016. Two others have also been prosecuted in relation to the money laundering.

JMLSG proposes further revisions to AML/CTF guidance

The Joint Money Laundering Steering Group (JMLSG) proposed minor revisions to its anti-money laundering and counter-terrorist financing guidance. The guidance was most recently updated in June 2017 to reflect the entering into force of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, SI 2017/692 (2017 MLRs). The deadline for comments on the new revisions is 4 December 2017.

Sanctions and Anti-Money Laundering Bill [HL]

A Bill to make provision enabling sanctions to be imposed where appropriate for the purposes of compliance with United Nations obligations or other international obligations or for the purposes of furthering the prevention of ​terrorism or for the purposes of national security or international peace and security or for the purposes of furthering foreign policy objectives; to make provision for the purposes of the detection, investigation and prevention of money laundering and terrorist financing and for the purposes of implementing Standards published by the Financial Action Task Force relating to combating threats to the integrity of the international financial system; and for connected purposes. The House of Lords committee stage (day 2) is due 29 November 2017.

Enforcement and redress

Directors banned for using money from a pension liberation scheme to pay off company debts

Three directors of a payday loan company who used money from a pension liberation scheme to pay off company debts have been banned for a total of 20 years following an investigation by the Insolvency Service.

Markets and trading

ESMA consultation on guidelines on position calculation under EMIR

ESMA published a consultation on its proposed guidelines on position calculation under the European Market Infrastructure Regulation 648/2012 (EMIR). The purpose of the guidelines is to ensure that trade repositories (TRs) calculate positions in derivatives in a harmonised and consistent manner in accordance with Article 80(4) of EMIR. The consultation closes on 15 January 2018.

Rules on indirect clearing of derivatives published in the Official Journal

Two Commission Delegated Regulations on RTS for indirect clearing arrangements under EMIR and Markets in Financial Instruments Regualtion /600/2014 (MiFIR) were published in the Official Journal of the EU. The regulations shall apply from 3 January 2018.

Council of the EU publishes compromise text on OTC derivatives transparency regulation

The Council of the EU published a compromise text on the proposal for a regulation amending EMIR. The regulation seeks to contribute to reducing systemic risk by increasing the transparency of the over-the-counter (OTC) derivatives market and reducing the counterparty credit risk and the operational risk associated with OTC derivatives.

The European Commission published a Commission Delegated Regulation supplementing the Securities Financing Transactions Regulation (Regulation (EU) 2015/2365) (SFTR) with regard to the fees charged by ESMA to trade repositories. In its annex, the Delegated Regulation specifies the calculation method and payment terms for the first-year interim supervisory fees defined in Article 13. The Commission is seeking feedback on the text by 14 December 2017.

Capital markets union: Council adopts securitisation rules

The Council of the EU adopted rules to develop a securitisation market in Europe, which it says will help create new investment possibilities and provide an additional source of finance, particularly for SMEs and start-ups. The Council set out that the new rules are part of the EU’s plan to develop a fully functioning capital markets union by the end of 2019.

Commission publishes report on European corporate bond markets

The European Commission published a report on improving European corporate bond markets, saying integrated, efficient and resilient corporate bond markets are a vital and core pillar of a successful capital markets union. The Commission says strong corporate bond markets will give businesses access to more diverse sources of funding and offer Europeans more investment opportunities.

Article 4(1)(14) of Directive (EC) 2004/39 (MiFID) should be interpreted as meaning that the concept of a ‘regulated market’ within the meaning of that provision covered a trading system in which multiple fund agents and brokers represented, respectively, ‘open end’ investment funds and investors, the sole purpose of which was to facilitate those investment funds in their obligation to execute the purchase and selling orders for shares placed by those investors. The Court of Justice of the European Union so held in proceedings concerning the imposition of charges on the applicant companies for costs incurred by the Netherlands Financial Markets Authority in performing its supervisory duties. The judgment is available at: C-658/15.

FCA fines trader £60,090 for market abuse

The FCA fined Paul Walter, a former Bank of America Merrill Lynch International Limited (BAML) bond trader, £60,090 for engaging in market abuse. The FCA found that Mr Walter, an experienced trader, had engaged in market abuse by creating a false and misleading impression as to supply and demand in the market for Dutch State Loans (DSL) on 12 occasions in July and August 2014.

ESMA issues clarification on rotation periods of CRA analysts

ESMA published an update to its Q&A on the application of the Credit Rating Agencies Regulation (CRA Regulation) (Regulation (EC) 1060/2009) to add a new section in Part VI to cover organisational requirements.

ESMA clarifies endorsement regime for third-country credit ratings

ESMA published updated guidelines on the application of the regime for endorsement of third-country ratings under Article 4(3) of the CRA Regulation. The guidelines replace the earlier guidelines adopted in May 2011.

ESMA updates its EMIR Q&As

ESMA published an update of its Q&As on practical questions regarding EMIR.

ESMA updates CSDR Q&As

ESMA published an update of its Q&As on the implementation of the Central Securities Depository Regulation (CSDR). The updated Q&S provide detailed answers to questions on relevant authorities, conduct of business rules, protection of securities and prudential requirements.

ESMA updates the Market Abuse Regulation Q&As

ESMA updated its Q&A document regarding the implementation of the Market Abuse Regulation. ESMA has added two new Q&As, which relate to the interpretation of Article 19 on insider dealing and on the types of ‘transaction’ by a person discharging managerial responsibilities prohibited during a closed period.

ESMA makes GFMA LEI Webinar available

ESMA staff recently participated in a Global Financial Markets Association (GFMA) webinar on the topic of Legal Entity Identifier (LEI) requirements under MiFID II and EMIR. A full video of the webinar can be viewed on ESMA’s YouTube channel (ESMA’s participation begins at the 09:20 minute mark) or download the presentation slides.

HSBC Private Bank fined HK$400m for ‘systemic failures’

HSBC Private Bank (Suisse) SA, the Hong Kong branch of the Switzerland-based private banking business of HSBC Group, has been fined a record sum of HK$400m, or over £38m. This comes after the Securities and Futures Appeals Tribunal (SFAT) upheld the Securities and Futures Commission (SFC’s) disciplinary action against the bank for ‘material systemic failures in relation to the sale of derivative products’. The failures were against Lehman Brothers-related Notes and Leveraged Forward Accumulators, in the run-up to the global financial crisis in 2008. The SFAT concluded that the bank’s culpability was ‘extensive, putting many clients at unnecessary risk of loss and indeed resulting in substantial losses for many’.

GFXC to clarify principle 17 of FX global code

The Global Foreign Exchange Committee (GFXC) issued a press release concerning its meeting on 14 November 2017, in which it discussed the response received to its request for feedback on Last Look practices in the Foreign Exchange Market.

EACH responds to European Commission’s post-trade consultation

The European Association of CCP Clearing Houses (EACH) responded to the European Commission’s consultation on post-trade in a capital market union: dismantling barriers and strategy for the future. The consultation seeks views on a range of issues, including the current state of post-trade markets, the main trends and challenges faced by post-trade services providers and users, and the best ways to remove barriers, including through financial technology.

Investment funds and wealth management

Joint Committee of ESAs updates Q&A on PRIIPs KID

The Joint Committee of the European Supervisory Authorities (ESAs) published an updated version of the Q&A document relating to the key information document (KID) requirements for PRIIPs, as laid down in Commission Delegated Regulation (EU) 2017/653.

Fund Objectives Working Group meeting

The FCA published a summary of points discussed by the Fund Objectives Working Group at its meeting on 25 September 2017, and papers setting out the issues to be raised in the first and second sessions of the working group, including some initial thoughts on the questions for discussion.

Consumer credit, mortgage and home finance

The Association of British Insurers (ABI) published guidance to help firms in the long-term savings market better identify, understand and support vulnerable customers. The ABI says the guide was developed by a working party of leading life and pension providers, and draws on examples of good practice to raise awareness across the market of how to best identify and support vulnerable customers.

Insurance and pensions

EIOPA sets out path towards increased supervisory convergence

The chair of EIOPA, Gabriel Bernardino, says that more supervisory convergence is needed to ensure financial stability and protect policyholders in the EU. Speaking at EIOPA’s 7th Annual Conference in Frankfurt, Mr Bernardino also gave an update on EIOPA’s review of Solvency II, and suggested some priorities for the roll-out of the proposed European Personal Pension Product (PEPP).

European Parliament seeks IDD application delay

The European Parliament asked the Commission to adopt a legislative proposal to postpone the application date of the Insurance Distribution Directive (EU) 2016/97 (IDD) until October 2018. It says a proposal is needed swiftly in order to enhance legal certainty concerning the provisions applicable and to allow for the necessary organisational and technical changes needed to comply with the provisions.

Proposal for technical revision of EU-Switzerland Agreement on non-life insurance

The Council of the EU published the European Commission’s proposal for a Council decision on the position to be taken on behalf of the EU in the EU-Switzerland Joint Committee (ESJC) on a technical revision of the agreement on direct insurance other than life insurance (COM(2017) 666 final). The Annex to the proposal contains a form of decision to be adopted by the ESJC.

EIOPA identifies a search-for-yield trend in the investment behaviour of insurers

EIOPA published survey results analysing trends in the investment behaviour of European insurers over the past five years, which revealed trends that could be associated with search-for-yield behaviour in the insurance industry.

Recent government reforms and rapid market changes have led to reduced consumer choice over pensions products, leaving the UK facing a potential crisis in the retirement income market, according to a report from the Pensions Institute.

OECD updates guidelines on insurer governance

The Organisation for Economic Co-operation and Development (OECD) published an updated version of its guidelines on insurer governance. The guidelines have been revised and expanded for the second time since they were first adopted in 2005 to reflect evolving market practices and updates to international guidance following the financial crisis.

FSB says no new G-SII list for 2017

The Financial Stability Board (FSB), in consultation with the International Association of Insurance Supervisors (IAIS) and national authorities, decided not to publish a new list of global systemically important insurers (G-SIIs) for 2017. The policy measures set out in the FSB’s 2016 communication on G-SIIs, as updated in February 2017, on the higher loss absorbency (HLA) standard, will continue to apply to the firms listed in the 2016 communication.

Payment services and systems

ECB regulations and decisions on SIPS published in the Official Journal

Two ECB regulations and two decisions on systemically important payment systems (SIPS) were published in the Official Journal of the EU.

Regulation (EU) 2017/2094 of the ECB of 3 November 2017 amending Regulation (EU) No 795/2014 on oversight requirements for SIPS (SIPS Regulation)

Regulation (EU) 2017/2095 of the ECB of 3 November 2017 amending Regulation (EC) No 2157/1999 on the powers of the ECB to impose sanctions

Decision (EU) 2017/2097 of the ECB of 3 November 2017 on the methodology for calculating sanctions for infringements of the oversight requirements for SIPS, and

Decision (EU) 2017/2098 of the ECB of 3 November 2017 on procedural aspects concerning the imposition of corrective measures for non-compliance with Regulation (EU) No 737/2014

ECON scrutiny paper on PSD2 and the IFR

In advance of the European Parliament’s Committee on Economic and Monetary Affairs (ECON) scrutiny session on 21 November 2017, ECON published a briefing on the revised Payment Services Directive (PSD2) (Directive (EU) 2015/2366) and the RTS on Strong Customer Authentication and Secure Communication and the RTS on the separation of payment card schemes and processing entities under the Interchange Fee Regulation (IFR) (Regulation (EU) 2015/751).

SEPA Instant Credit Transfer scheme goes live

The European Payments Council (EPC) announced that the SEPA Instant Credit Transfer scheme is operational. The system allows for transfers of up to 15,000 euros in less than ten seconds. The EPC called the launch a ‘significant step towards faster, more innovative and digital payments in Europe’.

CAT private action—summary of damages action in British Telecommunications Plc and Others v MasterCard Inc and Others published

The Competition and Markets Authority (CAT) published a summary of notice of a claim for damages brought under section 47A of the Competition Act 1998 by British Telecommunications plc, EE Limited, Plusnet plc and DABS.COM Limited against MasterCard. The claim is for damages resulting from an alleged overcharge for credit card transactions over the period 11 September 2011 to 9 December 2015 following the introduction and operation of Multilateral Interchange Fee (MIFs). The claimants argue they have suffered loss and damage as a result of this overcharge and claim damages as the difference between the MIF which the claimants paid and the MIF which the claimants would have paid had a lawful scheme been in operation.

Fintech and virtual currencies

Machine learning and the future of financial regulation

The FCA published a speech given by its head of behavioural economics and data science, Stefan Hunt, on the power of machine learning and artificial intelligence for regulators. In the speech, which was delivered on 19 October 2017 at the Beesley Lecture Series on regulatory economics, Mr Hunt explores how machine learning can improve regulatory tools and improve the efficiency and effectiveness of regulators.

Report on FinTech and financial institution collaborations

TheCityUK, Santander UK and Shearman & Sterling published a report setting out how greater collaboration between financial services institutions and FinTechs can smooth the path to developing innovative new digital products and services.

Deadline for responses to Legal Entity Identifier (LEI) Regulatory Oversight Committee (ROC) consultation a proposed limited update to the way relationships affecting funds are recorded in the global LEI system (GLEIS).

27 November 2017

Investment funds and wealth management

Deadline for responses to the European Commissions inception impact assessment on crowdfunding, seeking views on possible ways of regulating the sector.

28 November 2017

Prudential requirements

The results of the Bank of England (BoE) 2017 stress test scenarios for the seven major UK banks and building societies will be published on this date.

Deadline for responses to the European Commissions consultation on common minimum levels of capital that EU banks must set aside to cover incurred and expected losses on newly originated loans that turn non-performing (NPLs).

]]>http://blogs.lexisnexis.co.uk/fs/weekly-highlights-23-november-2017/feed/0http://blogs.lexisnexis.co.uk/fs/weekly-highlights-23-november-2017/Weekly highlights—16 November 2017http://feedproxy.google.com/~r/FinancialServicesBlog/~3/xKM0-dER1DU/
http://blogs.lexisnexis.co.uk/fs/weekly-highlights-16-november-2017/#respondThu, 16 Nov 2017 15:56:29 +0000http://blogs.lexisnexis.co.uk/fs/?p=7956Read More...]]>Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 16 November 2017.

Brexit

Brexit: Parliament to get vote on new Withdrawal Agreement and Implementation Bill

The government confirmed that Parliament will get to vote on the final deal put in place for Brexit before the UK leaves the EU. Speaking to MPs, the Secretary of State for Exiting the European Union David Davis outlined plans for a Withdrawal Agreement and Implementation Bill which is expected to cover issues including an agreement on citizens’ rights, the financial settlement and any implementation period agreed during the negotiations. Mr Davis said the Bill means the ‘major polices will be directly implemented into domestic law by primary legislation—not by secondary legislation under the EU (Withdrawal) Bill’—to allow for Parliamentary scrutiny and oversight.

David Davis sets the scene for financial services post-Brexit

At a speech given at UBS, the secretary of state for exiting the European Union, David Davis, provided some insights into what the UK government is doing in its Brexit negotiations to maintain the City of London’s position as the world’s leading financial centre. He maintains that it is in the interests of both the UK and the EU to do so.

The House of Lords EU Financial Affairs sub-committee continued its inquiry into financial regulation and supervision post-Brexit by taking oral evidence from representative of the banking, insurance and FinTech industries.

EU publishes FAQs on relocating EMA and EBA after Brexit

The Council of the EU published a list of FAQs relating to the relocation of the European Medicines Agency (EMA) and the European Banking Authority (EBA) after Brexit. Among other things, the FAQs detail the timeline for deciding new host cities for the two organisations, the candidates as well as how the vote for host cities will work. The votes will take place on 20 November 2017.

Yves Mersch, a member of the executive board of the European Central Bank (ECB), said that the ECB strongly welcomes the European Commission’s proposals to strengthen the role played by EU central banks in the supervision and regulation of EU and third-country central counterparties (CCPs). Speaking at the Cumberland Lodge Financial Services Summit in Windsor Great Park, Mr Mersch warned that Brexit creates uncertainties not only for CCPs but also for other financial market infrastructures (FMIs).

A letter to the Chancellor of the Exchequer from the EU Financial Affairs Sub-Committee has called for urgent agreement of a post-Brexit standstill transition period for the financial services sector. The Committee’s aim is to alert the Chancellor to the weight of evidence it has received during its current inquiry into the future of financial regulation and supervision following Brexit.

ECB chair discusses banking union and Brexit relocations

The chair of the supervisory board of the ECB, Danièle Nouy, delivered a speech on forging a European banking market, saying a European-wide regulatory perspective gives a better vantage point than nationally, allowing the ECB to compare banks from across the euro area, so that it can spot joint problems, shared vulnerabilities and contagious links. Ms Nouy said that when the ECB acts it is not influenced by national interests, which in the past have often stood in the way of decisive and necessary action.

Financial Conduct Authority updates

FCA publishes latest Handbook Notice and new MiFID 2 guide

The Financial Conduct Authority (FCA) published Handbook Notice No 49, which includes changes to the FCA Handbook and other materials made by the FCA Board on 9 November 2017, together with feedback on the corresponding consultations. Changes include a new MiFID 2 guide and a change to the Prudential sourcebook for Investment Firms (IFPRU) to help ensure full implementation of the Capital Requirements Directive (CRD).

Regulatory architecture

ECB reports on the supervision of LSIs

The ECB published a report on the supervision of less significant institutions (LSIs). The report examines the organisation of banking supervision by the Single Supervisory Mechanism (SSM), which comprises the ECB and the national competent authorities (NCAs) of participating Member States, and sets out developments and challenges for the sector, as well as the types of supervisory activity conducted.

Prudential requirements

EBA publishes final guidance on connected clients

The EBA published its final guidelines on the treatment of connected clients as defined in the Capital Requirements Regulation (EU) 575/2013 (CRR), aiming at supporting institutions in identifying all possible connections among their clients, in particular when control relationships or economic dependency should lead to the grouping of clients because they constitute a single risk. The guidelines apply to all areas of the CRR where the concept of ‘group of connected client’ is used, including the EBA technical standards and the EBA guidelines that refer to that concept. For further information see LNB News 14/11/2017 22.

The EBA published a consultation on draft Regulatory Technical Standards (RTS) specifying the different methods of prudential consolidation, which can be applied when certain conditions and criteria are met. The aim of these draft RTS is to ensure that the appropriate method of prudential consolidation is applied for the calculation of the CRR requirements on a consolidated basis.

EBA annual reports on the consistency of internal model outcomes

The EBA published two reports on the consistency of risk weighted assets (RWAs) across all EU institutions authorised to use internal approaches for the calculation of capital requirements. The reports cover benchmarking exercises on credit risk for large corporate, institutions, and sovereign portfolios (collectively referred to as ‘low default portfolios’—LDPs) and market risk. The results confirm previous findings, with the majority of risk-weights (RWs) variability explained by fundamentals.

The EBA published an Opinion addressed to the European Parliament, Council and European Commission concerning the regulatory perimeter under the Capital Requirements Directive (CRD IV)/CRR. These include the use of Articles 2(5) and 9(2) CRD IV and the interpretation of the terms ‘financial institution’ and ‘ancillary services undertaking’ as defined in the CRR. The Opinion is based on the results of a detailed assessment across the EU of the prudential treatment of ‘other financial intermediaries’ (OFIs), ie those entities carrying out credit intermediation activities that are not credit institutions nor other specified types of financial entity. The results of this assessment are included in a Report published alongside the Opinion.

The Council of the EU published the final compromise text of the proposed regulation amending the CRR as regards transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds and the large exposures treatment of certain public sector exposures denominated in non-domestic currencies of Member States.

European Parliament and Council reach agreement on creditor ranking and IFRS 9 transition

The Council of the EU endorsed an agreement with the European Parliament on a draft directive on the ranking of unsecured debt instruments in insolvency proceedings (bank creditor hierarchy), and a draft regulation on transitional arrangements to phase in the regulatory capital impact of the International Financial Reporting Standard (IFRS) 9.

Commission publishes IIA for a Regulation to amend the CRR as regards prudential backstops

The European Commission published an Inception Impact Assessment (IIA) for a proposed Regulation amending the CRR as regards prudential backstops preventing under-provisioning of non-performing exposures.

Commission adopts two BRRD RTS

The European Commission adopted Commission Delegated Regulations (C(2017) 7436 final and C(2017) 7438 final) setting out RTS for valuations under Articles 36 and 74 of the Bank Recovery and Resolution Directive 2014/59/EU (BRRD).

Compromise text of BRRD Insolvency Hierarchy Directive nears approval

The Council of the EU published an “I” item note inviting the Permanent Representatives Committee (Coreper) to approve the final compromise text of the proposed directive amending the BRRD as regards the ranking of unsecured debt instruments in insolvency hierarchies (BRRD Insolvency Hierarchy Directive). The final compromise text was agreed on 25 October 2017 following negotiations between the Presidency of the EU, the European Parliament and the Commission.

Commission consults on minimum NPL capital requirements

The European Commission issued a consultation paper on common minimum levels of capital that EU banks must set aside to cover incurred and expected losses on newly originated loans that turn non-performing (NPLs). The consultation is part of the action plan to tackle NPLs in the EU agreed by all Member States at the ECOFIN Council in July 2017. Feedback is sought by 30 November 2017.

The EBA acknowledged the adoption by the European Commission of the Implementing Act amending Regulation (EU) 680/2014(Implementing Technical Standards (ITS) on Supervisory Reporting) with regard to amendments to COREP and Additional Monitoring Metrics for liquidity as well as other amendments.

Commission seeks technical advice from EBA on NPLs plan

The European Commission is seeking technical advice from the EBA to assess the potential impact for EU banks from adopting statutory prudential backstops for newly originated loans that turn non-performing (NPLs), and to consider possible calibration options.

EBA says compliance with O-SII guidelines good but room for harmonisation

The EBA published a report on the peer review carried out to evaluate the implementation of its guidelines on the criteria for the assessment and identification of other systemically important institutions (O-SIIs). While it finds that the majority of authorities comply with the guidelines, it says some requirements are not consistently and comprehensively applied in all jurisdictions.

ECB vice-chair urges action on NPLs

The vice-chair of the supervisory board of the ECB, Sabine Lautenschläger, delivered a speech on the EU’s non-performing loan (NPL) problems, saying banks that manage to forcefully address NPLs can focus on the future and attract new investors and new business, instead of forever having to look to the past. ‘These banks can do their job: finance the economy’.

ECB recommends changes to Commission’s banking reform package

The ECB published two opinions (CON/2017/46 and CON/2017/47) on the European Commission’s November 2016 proposed banking reform package. While the ECB is generally supportive of the proposed reforms, it suggests a number of changes to the Commission’s proposals.

Risk management and controls

FCA responds to FOI request on the RBS GRG report

The FCA published a letter dated 27 October 2017 responding to a freedom of information (FOI) request on the section 166 skilled persons report produced on the treatment of small and medium sized enterprise customers referred to RBS Global Restructuring Group (GRG). The letter sets out some further information about the publication of the report, but also explains the FCA’s reasoning for not disclosing further information.

Remuneration exclusions form available on FCA website

The FCA published the remuneration exclusions form, for use by FCA solo-regulated firms/groups to notify, or to seek prior approval from, the FCA to exclude individuals from identification as a material risk taker (MRT) in accordance with Article 4 of Commission Delegated Regulation (EU) No 604/2014 and relevant provisions of the Remuneration Codes (SYSC 19).

CISI responds to FCA’s proposals on inducements and qualifications

The Chartered Institute for Securities & Investment (CISI) said a proposal by the Financial Conduct Authority (FCA) to ban the offering or acceptance of inducements within the financial services profession could ultimately hurt consumers. CISI also objects to the FCA’s proposed narrowing of the scope of training and competence requirements.

Financial crime

EU talks on AMLD update break down

Negotiations between the EU Parliament and Council have stalled on the 5th update of the Anti-money Laundering Directive. According to rapporteurs, talks broke down after the Council attended the final scheduled trilogue without a mandate and without a text as a basis for discussion.

Procedures for fourth round of FATF AML/CFT mutual evaluations

The Financial Action Task Force (FATF) published the procedures that are the basis for the fourth round of mutual anti-money laundering/counter-terrorist financing (AML/CFT) evaluations by FATF members. The scope of the evaluations will involve two inter-related components for technical compliance and effectiveness.

FCA publishes application form for MLR Individual of an Annex I Financial Institution

The FCA published the application form for an MLR Individual of an Annex I Financial Institution, under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

Enforcement and redress

Hayes v Financial Conduct Authority

Proceedings brought by the FCA seeking a prohibition order against the applicant, following his conviction for conspiracy to defraud, and for publication of the related decision notice would be stayed and limited respectively. The Upper Tribunal, Tax and Chancery Chamber, held that in the circumstances of the applicant’s case, his referral of his convictions to the Criminal Cases Review Commission had justified the pragmatic approach that a stay ought to be granted. The publication of the FCA’s decision notice would be allowed but would be limited to only certain information rather than the full notice itself. The judgment is available at: [2017] UKUT 423 (TCC).

Larksway Investments Ltd v Financial Conduct Authority

The applicant company’s application for a stay of a reference made by it to the Upper Tribunal (Tax and Chancery Chamber)(the tribunal) was refused by the tribunal on the basis that a stay would not assist it in ensuring that there was a proper consideration of the issues and the need to avoid unnecessary delay in the proceedings. However, the FCA’s application for a direction that the reference be struck out was granted on the ground that there was no reasonable prospect of the applicant’s case succeeding. The judgment is available at: [2017] UKUT 422 (TCC).

Cooper v Financial Conduct Authority

Where the applicant had contended that he had been prejudicially identified in a decision notice given by the FCA to a company, in respect of which he had been a compliance director and a member of its board, he was not entitled to an extension of time, following a delay of almost 14 months, to make a reference to the Upper Tribunal (Tax and Chancery Chamber) (the UTT), concerning his third party rights, under s 393 of Financial Services and Markets Act 2000 (FSMA 2000). So held the UTT, which further ruled that, even if the reference had been admitted, the applicant’s claim for third party rights would have been dismissed, because there had been no reference, in the final notice to the company, to any particular individual holding a position, and, accordingly, the applicant had not been ‘identified’, within the meaning of section 393 FSMA 2000. The judgment is available at: [2017] UKUT 428 (TCC).

FCA bans sole trader

The FCA published a final notice stating that it has cancelled the Part IV permission of Mr Anthony Badaloo, a sole trading financial adviser operating as Church Hill Finance.

BoE seeks views on how its new enforcement committee will operate

The Bank of England (BoE) issued a consultation paper on the detailed statement of procedure for the new Enforcement Decision Making Committee (EDMC). The consultation also includes amendments to the existing statements of policy and procedure. Feedback is sought by 2 February 2018.

MiFID II and MiFIR

MiFID II: ESMA consults on systematic internalisers’ quote rules

The European Securities and Markets Authority (ESMA) opened a public consultation on proposed amendment of RTS 1 which details the implementation of the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). EMSA is proposing to amend RTS 1 to clarify that systematic internalisers’ (SI) quotes should reflect the price increments applicable to EU trading venues. The public consultation is open until 25 January 2018.

ESMA updates MiFID II Q&As on market structure and transparency

ESMA updated its Q&As on market structure and transparency under MiFID II and MiFIR.

ESMA updates MiFID II investor protection Q&As

ESMA added four new Q&As on the implementation of investor protection topics under MiFID II/MiFIR. The new Q&As cover, among others, the topics of post-sale reporting, record keeping, and inducements.

ESMA publishes Q&A on trading obligation for shares under MiFID II

ESMA updated its Q&As regarding the implementation of MiFID II. The update clarifies the application of the trading obligation for shares to trade certain instruments on-venue.

ESMA updates its MiFID II/MiFIR data reporting Q&As

FCA publishes further MiFID II position limits

The FCA published a further set of position limits on certain commodity derivative contracts which are traded on UK trading venues. The limits have been established in accordance with Article 57 of MiFID II and will apply from 3 January 2018 to positions held in the spot month and the other months’ periods for each commodity derivative.

Minor amendment to MiFID Delegated Regulation published in the Official Journal

A corrigendum to Commission Delegated Regulation (EU) 2017/1018 of 29 June 2016 supplementing MiFID with regard to RTS specifying information to be notified by investment firms, market operators and credit institutions was published in the Official Journal of the EU.

FCA’s Market Watch focuses on MiFiD II implementation

The FCA published the November 2017 issue of Market Watch, its newsletter on market conduct and transaction reporting issues.

Markets and trading

EuVECA and EuSEF amending regulation published in the Official Journal

Regulation (EU) 2017/1991 of the European Parliament and of the Council of 25 October 2017 amending Regulation (EU) No 345/2013 on European venture capital funds (EuVECA) and Regulation (EU) No 346/2013 on European social entrepreneurship funds (EuSEF) has been published in the Official Journal. Regulation (EU) 2017/1991 shall enter into force on the twentieth day following that of its publication in the Official Journal. It shall apply from 1 March 2018.

Kroll Bond Rating Agency gets ESMA CRA registration

ESMA, the EU’s direct supervisor of credit rating agencies (CRAs), registered Kroll Bond Rating Agency Europe Limited as a CRA under Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (CRA Regulation), with effect from 13 November 2017.

ECB opinions on EMIR amendments published in the Official Journal

European Central Bank (ECB) opinions (CON/2017/39 and CON/2017/42) on amending Regulation (EU) No 648/2012 (EMIR) was published in the Official Journal of the EU.

MAR—clean markets depend on a state of mind

The director of market oversight at the FCA, Julia Hoggett, gave a speech on MAR and the market abuse regime as a whole, covering the approach which firms need to adopt to achieve effective compliance and the way in which the FCA is currently set up to surveil the markets.

The General Court issued its judgment in Case T-180/15 Icap and Others v Commission, in which it partially annulled the infringement decision (including the provision imposing a €14.96m fine) issued to Icap, a leading interdealer broker, for its alleged participation in cartels relating to the Yen interest rate derivatives (YIRD) sector (Case AT. 39861 Yen interest rate derivatives). Icap had been charged for allegedly facilitating the illicit activities of five international banks (all of whom had admitted their involvement and settled with the Commission in December 2013) in relation to six of the seven cartels uncovered by the Commission in the YIRD sector. However, the General Court judgment details a number of defects with the Commission’s decision. In particular, the General Court was not satisfied that Icap’s participation could be confirmed in one of the cartels, that Icap’s involvement in three other cartels was as long as stated and, finally, that the Commission had adequately explained the methodology it employed in determining the level of fines imposed (six fines making up the overall €14.96m fine imposed). On the basis of the above considerations, the General Court annulled in part the Commission decision—including the part setting out the calculations of the level of fines imposed.

AFME consultation response calls for removal of European post-trade barriers

The Association for Financial Markets in Europe (AFME) responded to the European Commission’s consultation on post-trade in a capital markets union (CMU), which sought views on the main trends and challenges faced by post-trade services providers and users, and the best ways to remove barriers, including through financial technology. AFME says it is in favour of dismantling post-trade barriers, but it says a strategic plan for a comprehensive European post-trade reform should be developed.

Asia-Pacific derivatives markets have grown markedly in last decade

The International Swaps and Derivatives Association published a survey of Asia-Pacific derivatives markets showing that the last decade has seen significant growth in the region, with Hong Kong and Singapore now pre-eminent in regional trading of foreign exchange (FX) and interest rate derivatives (IRD).

Investment funds and wealth management

The European Commission opened a consultation on institutional investors and asset managers’ duties regarding sustainability. The consultation follows the July 2017 recommendation by the High Level Expert Group on sustainable finance that the Commission clarify that the fiduciary duties (loyalty and prudence) of institutional investors and asset managers explicitly include material environmental, social and governance (ESG) factors and long-term sustainability. Feedback is sought by 22 January 2018.

The FCA publicly censured Capita Financial Managers Limited (CFM) and agreed that CFM will pay up to £66m to investors who suffered loss as a result of investing in the Guaranteed Low Risk Income Fund, Series 1 (later renamed the Connaught Income Fund, Series 1) (the Fund), which is now in liquidation. The payment will be made via the FCA.

ESMA warns investors and firms of the risks and regulation of ICOs

ESMA issued statements on the risks posed to investors by initial coin offerings (ICOs) and the rules that apply to firms dealing in them. ICOs are growing rapidly around the world and ESMA is concerned that investors may not be aware of the risks, and firms may not be complying with applicable EU legislation.

An independent review commissioned by the government has set out how the financial services industry and government can work together to increase social impact investments in the UK. The independent advisory group behind the review found that, while there is a growing interest among individuals for their investments to have a positive impact on society, as well as produce financial returns, the market for social impact investment remains underdeveloped.

Consumer credit, mortgage and home finance

The European Parliament adopted a resolution tabled by the Committee on Economic and Monetary Affairs (ECON) on the European Commission’s Action Plan on Retail Financial Services. The resolution was included in ECON’s report dated 20 October 2017 and will now be forwarded to the Council of the EU and the Commission.

Insurance and pensions

PRA consults on its Solvency II matching adjustment expectations

The Prudential Regulation Authority (PRA) is consulting (CP24/17) on a draft supervisory statement (SS) setting its proposed expectations of firms regarding the application of the Solvency II matching adjustment (MA) within the calculation of the Solvency Capital Requirement (SCR). The PRA is seeking to update and consolidate all of its expectations regarding the modelling of the MA in internal models into a single SS in order to provide clarity. Feedback is sought by 9 March 2018.

PRA publishes consultation on financial management and planning by insurers

The PRA published a consultation paper (CP23/17) in which the regulator seeks views on a draft supervisory statement (SS) on effective financial management and planning by insurance firms and groups.

IAIS launches consultation on three ICPs

The International Association of Insurance Supervisors (IAIS) opened a consultation on its draft revisions of some of its insurance core principles (ICPs), namely ICP 8 (Risk Management and Internal Controls), ICP15 (Investments), ICP 16 (Enterprise Risk Management for Solvency Purposes). The consultation also covers the ComFrame material integrated with these ICPs, and the proposed definitions of terms related to Enterprise Risk Management for Solvency Purposes. Feedback is sought by 8 January 2018.

Technical information for reporting under Solvency II published in the Official Journal

Commission Implementing Regulation (EU) 2017/2015 of 9 November 2017 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 September 2017 until 30 December 2017, in accordance with Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), was published in the Official Journal.

EIOPA updates its regulatory Q&As

The European Insurance and Occupational Pensions Authority (EIOPA) published new Q&As on templates for the submission of information to the supervisory authorities, and the procedures, formats and templates of the solvency and financial condition report. There are also answers on Commission Delegated Regulation (EU) 2015/35 supplementing Solvency II, and on the Guidelines on the loss-absorbing capacity of technical provisions and deferred taxes​​​.

EIOPA publishes new Solvency II Q&As

EIOPA published new sets of questions and answers (Q&As) on Commission Delegated Regulation (EU) 2015/35 supplementing Solvency II, as amended. The Q&As address, among other things, the validation process referred to in Article 261a(1)(a) of the Delegated Regulation.

EIOPA publishes Solvency II statistics on the European insurance sector

EIOPA released a new set of statistical information on the European insurance sector based on Solvency II regulatory reporting. This set continues the series of quarterly statistics on solo undertakings launched on 28 June 2017. It contains country breakdowns and distributions of key variables based on reporting from solo insurance and reinsurance undertakings for the first quarter of 2017.

EIOPA published an update of the symmetric adjustment of the equity capital charge for end-October 2017, replacing the version published on 8 November 2017. The new symmetric adjustment is now 3.39% instead of the previously published 3.40%.

ENISA says cyber insurance standardisation needed if EU to reap gains

The European Union Agency for Network and Information Security (ENISA) published a report on commonality of risk assessment language in cyber insurance. It says that while several risk assessment languages and frameworks exist in cyber-insurance, the industry has yet to take steps in the direction of harmonisation. The report aims at further investigating this issue by identifying the incentives and barriers for adopting a common framework and makes recommendations towards the cyber insurance industry and EU policy makers to promote this harmonisation.

IAIS application paper on governance of insurance groups

The International Association of Insurance Supervisors (IAIS) published an application paper on the governance of insurance groups. The IAIS is a voluntary membership organisation of insurance supervisors and regulators from more than 200 jurisdictions. The mission of the IAIS is to promote effective and globally consistent supervision of the insurance industry in order to develop and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders and to contribute to global financial stability.

DWP publishes guidance on safeguarded-flexible pension benefits

The Department for Work and Pensions (DWP) published guidance which explains the information requirements where members hold rights to safeguarded-flexible pension benefits and suggests best practice for those charged with delivering them.

The House of Commons Work and Pensions Committee questioned HM Treasury, the FCA and DWP on pension freedoms, scams and engaging the public with pension planning. The Oral Evidence session took place on 15 November 2017.

Payment services and systems

PSD2 RTS published in the Official Journal

Commission Delegated Regulation (EU) 2017/2055 of 23 June 2017 supplementing Directive (EU) 2015/2366 of the European Parliament and of the Council (PSD2), with regard to RTS for the cooperation and exchange of information between competent authorities relating to the exercise of the right of establishment and the freedom to provide services of payment institutions, was published in the Official Journal of the EU.

TARGET2 decisions and guideline published in the Official Journal

Two ECB amending decisions and a guideline on the Trans-European Automated Real-time Gross Settlement Express Transfer system (TARGET2) were published in the Official Journal of the EU;

The European Payments Council published implementation guidelines for the Single Euro Payments Area (SEPA) rules for implementing the interbank ISO 20022 XML message standards based on version 1.1 of the 2017 SEPA Instant Credit Transfer (SCT Inst) rulebook, which takes effect on 21 November 2017 at 08:00 CET.

EBA BSG feeds back on PSD2 fraud reporting requirement guidelines

The EBA Banking Stakeholder Group (BSG) responded to the EBA’s consultation on its guidelines on fraud reporting under PSD2.

FCA director discusses PSD2 and the changing face of payments

The director of retail banking supervision at the FCA, Karina McTeague, spoke on risk, legislative change and the increasing rate of innovation in the payments landscape. Ms McTeague discussed ways in which PSD2 opens up opportunities for businesses to develop new services to help consumers manage their money, to compare financial products, or to pay for things online.

Fintech and virtual currencies

EU banks need to prepare for FinTech, says ECB director

EU banks need to get ready for harsher competition from FinTech companies, according to Ignazio Angeloni, a member of the supervisory board of the ECB. In an interview published in the ECB’s Supervisory Review, Mr Angeloni also discusses how the banking landscape has changed since the financial crisis and considers whether integration has progressed and whether cross-border consolidation will happen.

EBA BSG publishes proposal on regulatory sandboxes

The EBA’s Banking Stakeholder Group (BSG) published a proposal (dated 20 July 2017) addressed to the EBA on regulatory sandboxes, amid concerns that as more European countries set up regulatory sandboxes, there are risks of creating a fragmented ecosystem of national sandboxes with different regimes.

Dates for your diary

Date

Topic

Event

17 November 2017

Prudential requirements

Deadline for responses to the Bank of England’s (BoE) consultation paperon its proposed policy on valuation capabilities to support resolvability.

Deadline for responses to the European Commission’s draft implementing regulation on the extension of the transitional periods related to own funds requirements for exposures to central counterparties set out in the CRR and EMIR.

]]>http://blogs.lexisnexis.co.uk/fs/weekly-highlights-16-november-2017/feed/0http://blogs.lexisnexis.co.uk/fs/weekly-highlights-16-november-2017/Weekly highlights—9 November 2017http://feedproxy.google.com/~r/FinancialServicesBlog/~3/NIc3IJZZzTc/
http://blogs.lexisnexis.co.uk/fs/weekly-highlights-9-nov/#respondThu, 09 Nov 2017 16:07:18 +0000http://blogs.lexisnexis.co.uk/fs/?p=7952Read More...]]>Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 9 November 2017.

Financial Conduct Authority updates

The House of Commons Treasury Committee published a transcript of oral evidence given to it on 31 October 2017 by the chief executive of the Financial Conduct Authority (FCA), Andrew Bailey, and the FCA chair John Griffith-Jones, on the work of the FCA. Topics discussed included Brexit, cybercrime, bank transfer scams, Saudi Aramco and the Royal Bank of Scotland Global Restructuring Group.

FCA policy development update for November 2017

The FCA published the latest version of its policy development update, which provides information on its recent and upcoming publications. Future publications include policy statements on implementation of the Insurance Distribution Directive (IDD), which are expected in December 2017 and January 2018, and a policy statement and further consultation on implementation of the Financial Advice Market Review, scheduled for December 2017.

FCA board minutes published

The FCA released the minutes of its 11 and 12 September 2017 board meeting. Andrew Bailey’s chief executive report covered the RBS Global Restructuring Group enquiry, the Which? super complaint, and the fairness of some terms in the motor finance industry. The Insurance Distribution Directive, Brexit and PPI were also among the topics discussed.

Regulatory architecture

The Competition and Markets Authority (CMA) published an information note on arrangements regarding leniency applications from cartel informants, in the context of the concurrency regime between the CMA and those sector regulators with full membership of the UK Competition Network (UKCN), following a consultation launched in June 2017. To date, informal arrangements have been in place and have operated on a case-by-case basis, involving a ‘single queue’ system, in which applicants need only apply to one authority in order to secure their place in the queue for leniency. The new note explains that the CMA should be the first point of contact for all leniency applicants for the purpose of the ‘single queue’ system, giving certainty to businesses who might otherwise be unsure whether to apply to the relevant sector regulator or the CMA in any particular case. The CMA also published its response to the consultation.

Chancellor expresses commitment to diversity in financial services

The House of Commons Treasury Committee published a letter dated 26 October 2017 from the chancellor of the exchequer, Philip Hammond, regarding the diversity of appointments to the Bank of England’s policy committees. In the letter, Mr Hammond said that the government ‘values diversity’ and is taking steps to improve diversity in both the public and private sector.

Government responds to Lords’ report on financial exclusion

The government responded to a report by the House of Lords Select Committee on financial exclusion. The Lords’ report, ‘Tackling financial exclusion: A country that works for everyone’, was published on 25 March 2017 and made 22 recommendations, focusing on government leadership, financial services regulation, financial education and capability, access to financial services, credit and borrowing, and welfare reform. The government addresses each recommendation in its response.

ECOFIN sets out progress on key financial services legislation

The European Economic and Financial Affairs Council (ECOFIN) discussed the progress made on key financial services legislative files. ECOFIN have published a table setting out the legislative position for 20 key directives and regulations.

Elisabeth Stheeman appointed as external member of the FPC

The Chancellor of the Exchequer, Philip Hammond, appointed Elisabeth Stheeman as an external member of the Financial Policy Committee (FPC). Ms Stheeman’s three-year appointment begins in early 2018, and fills the external position on the FPC created when Dame Clara Furse stepped down in November 2016.

Martin Taylor reviews the actions and policies of the FPC

An external member of the Bank of England’s Financial Policy Committee (FPC), Martin Taylor, delivered a speech to the Institute of International Monetary Research on the actions and policies of the FPC since its establishment. He also considers criticisms that have been made of macroprudential policy, and discusses the way the FPC functions, drawing a distinction between the FPC and the Monetary Policy Committee.

Danièle Nouy discusses Brexit, NPLs and ECB policy

The chair of the supervisory board of the European Central Bank (ECB), Danièle Nouy, spoke in an interview of the ECB’s approach to Brexit, non-performing loans, Italian banks and the Banking Recovery and Resolution Directive.

ECB vice-chair looks at the challenges facing EU banks

The vice-chair of the supervisory board of the ECB, Sabine Lautenschläger, delivered a speech at the ECB Forum on Banking Supervision in Frankfurt, in which she called again for consolidation of EU banks to make them stronger. Ms Lautenschläger examined the factors that are hindering bank profitability and outlined actions they can take to prepare for the future.

Authorisation, approval and supervision

FCA consults on industry codes of conduct and unregulated activities

The FCA launched a consultation on its approach to supervising and enforcing its Senior Managers & Certification Regime (SM&CR) rules for authorised firms’ unregulated activities, including those covered by industry-written codes of conduct. The FCA is also seeking views on extending the application of its Principle for Businesses 5—A firm must observe proper standards of market conduct—to unregulated activities. The deadline for comments is 5 February 2018.

Regulated fees and levies—adjustment to rates for 2017/18—PS27/17

The Prudential Regulation Authority (PRA) published policy statement ‘PS17/17: Regulated Fees and Levies—Rates for 2017/18’ setting out final rules and correcting the fee rates for the PRA’s annual funding requirement (AFR) for 2017/18. The appendix to the PS contains an update to Table III of the Periodic Fees Schedule in the Fees Part of the PRA Rulebook. Table III sets out the final periodic fee rates applicable to PRA fee blocks other than the minimum and transition costs fee blocks for the fee year 2017/18.

European banking supervision making progress but NPLs still a concern

The President of the ECB, Mario Draghi gave a speech on the accomplishments of three years of European banking supervision. Mr Draghi said there is now a more uniform approach to how banks are supervised, leading to a more resilient banking sector overall. The key catalyst for this change—alongside the new EU regulations—has been the harmonisation of the Supervisory Review and Evaluation Process (SREP).

Prudential requirements

PRA Rulebook—Administration Instrument (No. 3) 2017

Following a consultation on the Administration Instrument (No. 3) 2017, the PRA announced it intends to make corrections to the PRA Rulebook. The Instrument makes amendments, set out in Annex’s A to E, to the conduct rules, insurance—senior insurance management functions, regulatory reporting and fees.

IOSCO updates securitisation and MMF implementation reports

The International Organization of Securities Commissions (IOSCO) updated its reports on the peer review of the regulation of money market funds (MMFs), and on the peer review of the implementation of incentive alignment recommendations for securitisation. The reports summarise IOSCO’s ongoing efforts in monitoring implementation of reforms for MMFs and securitisation since the two peer reviews were published in September 2015.

Risk management and controls

The FCA issued an alert highlighting the risks faced by principals if they do not have adequate oversight of their appointed representatives or introducer appointed representatives (ARs). It also expands on an earlier alert warning that business carried out by a principal and its ARs can be inappropriately influenced by an introducer. The FCA expects principals to consider the content of this alert and take appropriate action.

2018 principles of remuneration call for disclosure of pay ratios

The Investment Association (IA) published its 2018 principles of remuneration in an open letter to the chairs of the remuneration committees of FTSE 350 companies. The principles, which have existed for over 40 years, are revised annually to reflect current best practice for listed companies when setting the pay of their top executives. The recommendations include reducing future variable pay awards (such as bonus and long-term incentive plans), to help limit overall pay.

Financial crime

Chancellor says economic crime reforms to be announced by end of 2017

The chancellor of the exchequer, Philip Hammond MP, said proposals will soon be announced on improving the governance and operational response of the UK’s economic crime agencies. Writing to the Treasury Select Committee following his evidence session on 11 October 2017, Mr Hammond said officials had provided advice to ministers on the effectiveness of the UK’s response to economic crime along with a series of recommendations to further enhance the UK’s capabilities.

FATF guidance on private sector information sharing

The Financial Action Task Force (FATF) published updated guidance on private sector information sharing. The FATF recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard and the guide sets out the challenges to information sharing and provides guidance both in the context of group wide and between financial institutions not part of the same group.

Outcomes from the joint FATF/GAFILAT Plenary, 1-3 November 2017

The FATF and El Grupo de Acción Financiera de Latinoamérica (GAFILAT) published the outcomes from the joint FATF/GAFILAT plenary in Buenos Aires, which was chaired by President Santiago Otamendi and GAFILAT President Eugenio Curia.

MiFID II and MiFIR

FCA releases forms and guidance for MiFID II notifications

The FCA updated its webpage on MiFID II notifications obligations for firms, adding a section on trading venue notifications. The webpage links to a table setting out what the FCA needs the venues to notify, why it need the information specified and how it expects to receive it, and when it should be notified.

FMLC seeks clarification on aggregation of positions and the meaning of ‘control’ under MiFID II

The Financial Markets Law Committee (FMLC) wrote to the European Securities and Markets Authority (ESMA) seeking clarification of the meaning of ‘control’ within the context of regulatory technical standards 21. The FMLC say it is unclear whether a parent undertaking is required to aggregate the positions of subsidiary undertaking where it cannot control the use of such positions, where the subsidiary is not a collective investment vehicle or the manager of a collective investment vehicle.

EFET and FIA release schema for position reporting under MiFID II

The European Federation of Energy Traders (EFET) and the Futures Industry Association (FIA) released the common EFET-FIA ITS4 schema for position reporting under MiFID II. It builds upon the schema developed by the UK’s FCA on the basis of Implementing Technical Standard 4 (ITS4) drafted by the European Securities and Markets Authority and adopted by the European Commission earlier in 2017. The FCA schema is designed for the reporting of positions by trading venues to the national competent authority (NCA).

Markets and trading

ISDA to produce analysis and roadmap on the transition to alternative risk-free rates

The International Swaps and Derivatives Association (ISDA) began a comprehensive analysis of the issues and potential solutions related to transitioning financial market contracts and practices to new alternative risk-free rates (RFRs). It will include a targeted global survey of buy- and sell-side firms and infrastructure providers to identify the means by which market participants can effectively implement regional benchmark transitions, as well as highlight possible challenges.

ISDA calls for further changes on EMIR

The ISDA published a white paper on the European Commission’s review of the European Market Infrastructure Regulation (EMIR). While the ISDA says the changes recommended by the Commission in May 2017 go some way towards easing the compliance costs and burdens of the regulation, it believes that additional changes are needed to simplify and strengthen the framework.

The board of the International Organization of Securities Commissions (IOSCO) published an Implementation Report: G20/FSB Recommendations related to Securities Markets, providing further clarity on the implementation of the G20/FSB post-crisis recommendations aimed at strengthening securities markets. For the report, IOSCO co-ordinated with the Financial Stability Board (FSB) to analyse the responses to the FSB’s 2017 Implementation Monitoring Network (IMN) survey.

ESMA published updated Questions and Answers (Q&As) regarding the implementation of the Benchmarks Regulation (BMR). The new guidance concerns the scope of the BMR’s application outside the EU, and transitional provisions applicable to third-country benchmarks.

CLLS updates its MAR Q&As

The City of London Law Society updated its set of Q&As on Regulation (EU) 596/2014—the Market Abuse Regulation. The update takes into account ESMA’s revision of its MAR Q&As published on 6 July 2017, and expands, at question 7, on the definitions in practice of a ‘person closely associated’ and a ‘person discharging managerial responsibilities’.

Over-the-counter market outperforms exchanges in trading of true repo

Frontclear Technical Assistance Programme (FATP) published a study assessing whether an exchange is likely to be more effective than an over-the-counter (OTC) market in fostering the domestic repo trading in emerging financial markets, particularly frontier markets. FATP concludes that the available theoretical and empirical evidence supports the argument that the OTC market tends to outperform exchanges in the trading of true repo.

Investment funds and wealth management

Paradise papers—leaked documents shine light on offshore financing

The International Consortium of Investigative Journalists (ICIJ) analysed a new cache of leaked files from offshore law firms and other sources containing information on the offshore activities and structures of prominent individuals and companies from all over the world. Like the Panama papers before it, the Paradise papers were first obtained by the German newspaper Süddeutsche Zeitung and shared with ICIJ. The BBC has reported that more than 100 media organisations, including the Guardian, are working on the 13.4 million records. Lawyers from Simmons & Simmons and Lewis Nedas Law argue that, while nothing illegal has taken place, reputational damage might lead some organisations to reconsider their tax structures.

Financial Services Trade and Investment Board releases annual report

The Financial Services Trade and Investment Board released its annual report for 2016-17, detailing the work done by the government and industry over the past year to drive the UK’s financial services trade and investment priorities. It also provides an insight into future work to ‘maintain and strengthen the UK’s position as the world’s leading financial centre’.

Council of the EU moves to extend duration of the European Fund for Strategic Investments

The Council of the European Union published an ‘I Item’ note confirming the final compromise text, with a view to agreement, on a regulation of the European Parliament and of the Council amending Regulations (EU) No 1316/2013 and (EU) 2015/1017 as regards the extension of the duration of the European Fund for Strategic Investments as well as the introduction of technical enhancements for that Fund and the European Investment Advisory Hub.

Consumer credit, mortgage and home finance

FCA consults on its approach to consumer regulation

The FCA published ‘FCA Mission—Our future approach to consumers’, the first in a series of supplements to its ‘Mission’ paper, setting out its approach to regulation. The FCA is consulting on the document, aiming to ensure that the proposed approach will truly help meet the needs of consumers. The consultation will close on 5 February 2018.

BSB consultation seeks consumer views on good practice in UK banking

The Banking Standards Board (BSB) launched a consultation on ‘What do good banking outcomes look like to consumers?’. The purpose of this consultation is to seek views, in particular from consumer and civil society organisations, about what the outcomes of a good banking culture look like to consumers, which will inform the BSB’s work to identify good practice. Feedback is sought by 26 January 2018.

Treasury Committee to investigate adequacy of UK household savings

The Treasury Committee launched an inquiry into the state of UK household balance sheets, including whether households are saving adequately in the current economic environment. The Committee’s main focus will be to scrutinise problematic indebtedness and inter-generational issues. Committee chair Nicky Morgan says the inquiry is timely as ‘the UK’s household saving rate has fallen in the last year, with 15% of adults over-indebted. There is also £200bn worth of consumer credit in the UK.’ The first evidence session of this inquiry will be held on 14 November 2017.

Insurance and pensions

FCA launches wholesale insurance brokers market study

The FCA launched a market study and terms of reference (MS17/2.1) into the wholesale insurance broker sector to assess how competition is working. The FCA wants to ensure that the sector is working well, and fosters innovation and competition in the interests of its diverse range of clients. There have been significant changes in the wholesale insurance sector in recent years, which have seen brokers developing new services and business practices.

EIOPA consults on its second SCR advice

The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on its second set of advice for the review of the solvency capital requirement (SCR) of Solvency II. EIOPA is seeking to ensure a proportionate and technically robust, risk-sensitive and consistent supervisory regime for the insurance sector, with possible simplifications. The consultation focuses on the remaining elements in the review of the SCR standard formula not covered by the advice submitted to the European Commission on 30 October 2017. Feedback is sought by 5 January 2018.

IAIS sets out unified path to convergence on ICS version 2.0

The International Association of Insurance Supervisors (IAIS) announced a unified path to convergence of group capital standards as it moves towards its ultimate goal of creating one insurance capital standard that achieves comparable outcomes across jurisdictions. The agreement responds to a call from members and stakeholders for more clarity on what the implementation of Insurance Capital Standard (ICS) Version 2.0 will mean in practice.

PRA consults on volatility adjustment risks

The PRA is consulting on proposals to clarify its expectations in respect of firms seeking approval to apply a volatility adjustment (VA) to insurance and reinsurance business. The proposals set out the risks that may arise from use of the VA and how firms are expected to consider those risks. Feedback is sought by 9 February 2018. F

The EFTA court has ruled that Article 201(1)(a) of the Solvency II Directive 2009/138/EC precludes terms and conditions in a legal expenses insurance contract that release the insurance company from its obligations under the contract if the insured person mandates an attorney to represent their interests, without the consent of the company, at a point in time when the insured person would be entitled to make a claim under the contract. The court’s judgment was given on 27 October 2017 in Pascal Nobile v DAS Rechtsschutz-Versicherungs AG, a case referred by the Princely Court of Appeal of Liechtenstein.

EIOPA published technical information for Solvency II relevant risk free interest rate (RFR) term structures with reference to the end of October 2017.

EIOPA monthly update on the equity capital charge for Solvency II

EIOPA published the technical information on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of October 2017.

Cost and trust still main barriers for people considering financial advice about retirement

42% of over 50s plan to speak to a professional financial adviser about their retirement finance options, up from 38% last year, according to research from Retirement Advantage. Trust and cost are still the main barriers for people who said they didn’t plan to consult a financial adviser about their retirement options.

Insurance Europe published an online consumer resource that sets out how policymakers and supervisors can ensure that rules governing insurers are in the best interest of consumers. It also highlights how the insurance industry contributes to meet consumers’ expectations and needs.

A notice concerning the provisional application of the bilateral agreement between the EU and US on prudential measures regarding insurance and reinsurance was published in the Official Journal of the EU.

PPI report looks at the impact of DC asset pooling

International evidence suggests that there may be scope for pooling assets for investment to improve member outcomes within a traditional defined contribution pension arrangement, according to a report from the Pensions Policy Institute.

Work and Pensions Committee questions former pensions minister on pension freedoms

The Work and Pensions Committee announced that it has questioned a number of pensions experts and the architect of pensions freedoms, former pensions minister Steve Webb, on pension freedoms, advice and guidance services, and the pensions market.

Payment services and systems

PSR leads industry-wide clamp down on authorised push payment fraud

The Payment Systems Regulator (PSR) released a report and opened a consultation on authorised push payment (APP) scams, following joint work on the subject with the FCA and industry. The consultation asks whether UK Finance’s best practice standards will be effective in addressing the issues identified in the PSR’s super-complaint response, and whether and how a contingent reimbursement model might work. Views are sought by 12 January 2018.

The Supreme Court granted permission to appeal in the case of Mastercard Incorporated and others (respondents) v Deutsche Bahn AG and others (appellants) (UKSC 2017/0095). The appellants are retailers, and the respondents own and/or operate the MasterCard credit card scheme. Under certain rules of the scheme, the cardholder’s bank charges the retailer’s bank a transactional fee known as a ‘multilateral interchange fee’ (MIF). The retailer’s bank passes on the cost of that indirectly, by charging its own fees to the retailer. The appellants brought claims alleging, amongst other things, that the respondents violated EU and domestic competition law by setting inflated MIFs and by causing banks to set inflated MIFs. They allege that this in turn inflated the charges payable by retailers to their own banks.

Government seeks views on legislative proposals for image clearing for cheques

The government is consulting on legislation for two measures to support the introduction of the image clearing system (ICS) for cheques. The proposed legislation concerns compensation and the use of cheques as evidence of payment. Feedback is sought by 1 December 2017.

Fintech and virtual currencies

The FCA published a new webpage which announces that the FCA, together with the Bank of England (BoE), is exploring how technology can provide solutions to the challenges firms face in implementing their regulatory reporting obligations.

NZ regulator comments on ICOs and cryptocurrencies

New Zealand’s Financial Markets Authority (FMA) published commentary on the legal status and regulatory requirements concerning initial coin offerings (ICOs) and cryptocurrency service providers, saying NZ cryptocurrency services providers must be a member of a dispute resolution scheme, must be on the Financial Services Providers Register, and must comply with fair dealing provisions in the Financial Markets Conduct Act.

Dates for your diary

Date

Subject

Event

14 November 2017

Authorisation, approval and supervision

Deadline for responses to European Commission evaluation roadmap for its fitness check of EU reporting requirements in the financial sector.

16 November 2017

Fourth Money Laundering Directive

ESA ‘Joint Guidelines (ESAs 2016 72): on the characteristics of a risk‐based approach to anti‐money laundering and terrorist financing supervision, and the steps to be taken when conducting supervision on a risk‐sensitive basis’ apply from this date.

]]>http://blogs.lexisnexis.co.uk/fs/weekly-highlights-9-nov/feed/0http://blogs.lexisnexis.co.uk/fs/weekly-highlights-9-nov/Weekly highlights—2 November 2017http://feedproxy.google.com/~r/FinancialServicesBlog/~3/CmWWDcYh6tA/
http://blogs.lexisnexis.co.uk/fs/weekly-highlights-2-november-2017/#respondFri, 03 Nov 2017 11:14:08 +0000http://blogs.lexisnexis.co.uk/fs/?p=7946Read More...]]>Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 2 November 2017.

Brexit

Lords to question BoE and PRA executives on post-Brexit regulation

The House of Lords’ EU Financial Affairs Sub-Committee heard evidence on post-Brexit financial regulation and supervision from the Bank of England (BoE) deputy governor for financial stability, Sir John Cunliffe, and the Prudential Regulation Authority (PRA) CEO, Sam Woods. The Committee was looking at potential ways to maintain equivalence or some other form of close relationship between the UK and EU regulatory regimes in order to preserve market access. The hearing took place on Wednesday 1 November. At the hearing, Sam Woods said that the BoE believed that up to 75,000 jobs in UK financial services could be lost as a result of Brexit with 10,000 going on the day Britain left the EU. The figures came from a 2016 estimate by consultants at Oliver Wyman Group and Sam Woods said that whilst the figures are a ‘moving feast’, depending on the exit deal the UK secures with the EU, they are plausible in the long term.

Financial Conduct Authority updates

FCA consultation on review of FSCS funding

The Financial Conduct Authority (FCA) issued consultation paper CP17/36, ‘Reviewing the funding of the Financial Services Compensation Scheme (FSCS): feedback from CP16/42’, final rules, and new proposals for consultation. Comments are required by 30 January 2018.

FCA publishes PPI campaign response data

The FCA released details of the responses it had received to its PPI claims deadline campaign. In September 2017 the FCA received nearly 10,000 calls on its PPI helpline and 400,000 visits to its PPI website.

MiFID II and MiFIR

European Commission, FCA and US SEC make announcements on MiFID II inducements and research

The FCA welcomed announcements made by the European Commission and the US Securities and Exchange Commission (US SEC) in relation to Directive 2014/65/EU (MiFID II) inducements and research reforms and their interaction with US regulation. The Commission issued guidance to clarify how EU investment firms subject to MiFID II should interact when they seek out brokerage and research services from broker-dealers in non-EU countries. Meanwhile, the US SEC announced measures to facilitate cross-border implementation of MiFID II’s research provisions by publishing three related no-action letters.

The Financial Conduct Authority (FCA) published position limits on certain commodity derivative contracts which are traded on UK trading venues. The limits have been established by exercising the power of direction under Regulation 16 of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (MIFID Regs) in accordance with Article 57 of Directive 2014/65/EU (MIFID II).

MiFID II regulations published in the Official Journal

Two Commission Delegated Regulations and two Commission Implementing Regulations laying down regulatory technical standards (RTS) and implementing technical standards (ITS) relating to MiFID II were published in the Official Journal of the EU.

Minor amendment to MiFIR published in the Official Journal

A corrigendum to Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (MiFIR) was published in the Official Journal of the EU. The corrigendum makes a minor correction to the first subparagraph of Regulation (EU) No 600/2014, Article 47(3). No substantive change has been made. The amendment inserts a missing word to aid grammatical clarity.

Prudential requirements

In a move welcomed by the European Commission, the European Parliament, Council and Commission agreed on aspects of the review of the Bank Recovery and Resolution Directive (BRRD) and of the Capital Requirements Regulation (CRR) and Directive (CRD) with a view to reduce risk in the banking sector and continue efforts to complete the banking union. The Commission believes the agreement to ‘fast-track’ selected parts of the 2016 EU banking reform package will ‘further strengthen the resilience of the EU banking sector while mitigating negative impacts’.

ECON publishes report on BRRD Insolvency Hierarchy Directive

The Committee on Economic and Monetary Affairs of the European Parliament (ECON) published its report on a proposal to amend the BRRD as regards the ranking of unsecured debt instruments in insolvency hierarchies (BRRD Insolvency Hierarchy Directive).

EBA’s stress test timetable finalised

The European Banking Authority (EBA) announced the final timeline of the 2018 EU-wide stress test. The exercise is expected to be launched at the beginning of 2018, with the results to be published by 2 November 2018. Together with the competent authorities, the EBA is now finalising the methodology and templates, and will aim to share them with participating banks ahead of the launch. The overall timeline for the stress test has been extended, to take into account the challenges that the implementation of IFRS 9 poses as regards the availability of starting point data in early 2017.

EBA consultation on management of interest rate risk arising from non-trading book activities

The EBA published a consultation paper on draft guidelines on the management of interest rate risk arising from non-trading book activities (EBA/CP/2017/19). The draft guidelines update the existing guidelines published in May 2015 and are expected to be applied by competent authorities and institutions from 31 December 2018. The consultation closes on 31 January 2018.

EBA consultations on SREP and stress testing

The EBA published consultation papers on draft guidelines on the revised common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing (EBA/CP/2017/18) and draft guidelines on institution’s stress testing (EBA/CP/2017/17). Both consultations close on 31 January 2018.

ECB opinion on CCP recovery and resolution framework published in the Official Journal

An opinion of the ECB of 20 September 2017 on a proposal for a regulation of the European Parliament and of the Council on a framework for the recovery and resolution of central counterparties was published in the Official Journal.

EBA recommends proportionate approach for the coverage of entities in group recovery plans

The EBA has published its final recommendation on the coverage of entities in banking group recovery plans. Addressed to both competent authorities and institutions, the recommendation builds on the legal frameworks established by the Capital Requirements Directive (CRD), the Bank Recovery and Resolution Directive (BRRD) and Commission Delegated Regulation (EU) 1075/2016. It aims to define common criteria to identify entities that need to be covered in group recovery plans, and the extent of such coverage.

PRA publishes its October 2017 Regulatory Digest

The Prudential Regulation Authority (PRA) published its Regulatory Digest for October 2017. It covers the key highlights, news and publications delivered by the PRA during October 2017.

EBA publishes final guidelines on supervision of CRDIV and BRRD significant branches

The EBA published its final guidelines on the supervision of significant branches. Prompted by the increasing demand to establish branches across the EU, the guidelines are designed to facilitate co-operation and co-ordination between the competent authorities involved in the prudential supervision of significant branches of EU institutions established in another Member State. In particular, the guidelines aim to facilitate co-operation and co-ordination of supervision of the largest and systemically important branches, the so-called ‘significant-plus’ branches.

Financial crime

FCA consults on proposals to recover running costs of new AML body

The FCA is consulting on proposals for recovering the costs of establishing and running the Office for Professional Body Anti-Money Laundering Supervision (OPBAS). The OPBAS will oversee the adequacy of the anti-money laundering (AML) supervisory arrangements of the 22 professional body AML supervisors listed in Schedule 1 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. The consultation will run until 8 January 2018.

Second reading of Sanctions and Anti-Money Laundering Bill announced

The House of Lords announced its second reading of the Sanctions and Anti-Money Laundering Bill on 1 November 2017. The Bill is intended to enable the UK to implement sanctions post-Brexit—both those it is obliged to as a UN member and for UK foreign policy purposes.

The 2017 national risk assessment (NRA) of money laundering and terrorist financing found that high-end money laundering and cash-based money laundering remain the greatest areas of money laundering risk to the UK. The NRA aims to underline the risks and pinpoints areas where businesses may be currently vulnerable, as well as inform the government, businesses and law enforcement agencies on how best to plug these gaps.

Criminal Finances Act 2017 (Commencement No 3) Regulations 2017

A number of provisions within the Criminal Finances Act 2017 (CFA 2017) came into force on 31 October 2017, including those which introduce a new procedure in the Proceeds of Crime Act 2002 for entities within the regulated sector to share information relating to suspicion that a person is engaged in money laundering, for the purpose of developing a joint disclosure report to the National Crime Agency. CFA 2017, s 36 introduces a similar procedure into the Terrorism Act 2000.

Enforcement

FCA cancels firm’s Part 4A permission following failure to comply with FOS award

The FCA published a final notice (dated 23 October 2017) issued to Foreman Financial Services Ltd (FFSL), cancelling its permission under Part 4A of the Financial Services and Markets Act 2000. The FCA issued the final notice as FFSL failed to satisfy the FCA that it was conducting its affairs in an appropriate manner having regard to the interests of consumers.

Markets and Trading

European Parliament adopts new rules for EU securitisations

The European Parliament has approved new rules to create a European framework for simple, transparent and standardised (STS) securitisations, as well as new rules on preferential capital treatment for STS securitisations. The rules are aimed at reviving securitisations in the EU, which declined after the US sub-prime crisis in 2008.

ESMA issues new Q&As on its alternative performance measures guidelines

The European Securities and Markets Authority (ESMA) published six new questions in its Q&As on the implementation of its guidelines on the alternative performance measures (APMs) for listed issuers. The new Q&As clarify definitions, scope, reconciliation and how to apply the fair review principle. The guidelines apply to APMs disclosed by issuers or persons responsible for drawing up a prospectus.

Retail banking

The European Parliament updated its procedure file to indicate that a debate in plenary on the European Commission’s Action Plan on Retail Financial Services has been scheduled for 13 November 2017, with a vote in plenary scheduled for the following day. A report on the Action Plan by the Committee on Economic and Monetary Affairs was tabled for plenary on 23 October 2017.

ECON reports on action plan on retail financial services

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) published its report on the European Commission’s action plan on retail financial services. The report was discussed at an ECON plenary session on 23 October 2017. The Commission published its action plan on 23 March 2017, setting out ways to provide European consumers with greater choice and better access to financial services across the EU. The action plan focuses on technology, and innovative online services, with the aim to drive progress towards a more integrated market for financial services.

Information security

The Treasury Select Committee published a letter dated 24 October 2017 from the Chief Executive of the FCA, Andrew Bailey, setting out replies to a series of questions on the FCA’s investigation into the Equifax cyber security breach. Mr Bailey explained the regulatory context, the nature of the investigation, and the FCA’s expectations of firms’ cyber security policies. He also clarified the division of responsibilities between the FCA and the Information Commissioner’s Office.

Market Infrastructure

ECB amends decision on TARGET2 terms and conditions

The ECB published a decision dated 10 October 2017, which amended Decision ECB/2007/7 concerning the terms and conditions of TARGET2-ECB. The changes are intended to reflect amendments recently made by the Governing Council to Guideline ECB/2012/27.

Consumer credit, mortgage and home finance

FCA publishes webpage on reporting consumer credit income

The Financial Conduct Authority (FCA) charges consumer credit firms annual fees based on the data in the CCR002 or CCR007 forms. The regulator has therefore published a webpage to assist firms in determining what they need to report about their total annual income to ensure they are charged correctly.

Insurance and pensions

The risk exposure of the insurance sector in the EU ‘remains overall stable with some slight improvements in the solvency ratios of groups and life solo undertakings’, the European Insurance and Occupational Pensions Authority (EIOPA) found. In its updated risk dashboard, EIOPA finds, among other things, profitability of the sector has shown ‘positive signs both for life and non-life’. Meanwhile, the inflation rate forecast is decreasing while unemployment rates continue to decrease.

The FCA published finalised guidance for firms on how to calculate redress for unsuitable defined benefit (DB) pension transfers. The guidance is for respondents who receive a complaint about advice they gave to transfer all or part of the cash value of accrued benefits under a DB pension scheme into a personal pension scheme.

The European Commission published a study examining consumers’ decision-making in the non-life insurance market when purchasing domestically and cross-border. The study highlights a number of factors that prevent consumers from getting the best deals and limit cross-border insurance purchases. It makes several policy recommendations to improve consumers’ decision-making, as well as to encourage cross-border purchasing of insurance.

Treasury Committee calls for urgent action on Solvency II

The Treasury Committee has published a report on the Solvency II Directive, in which it recognises problems with the Directive and how it has been implemented in the UK. It calls on the Prudential Regulation Authority (PRA) to work more closely with industry and consider ways to maximise proportionality. The Committee also says that the Treasury should consider making the facilitation of effective competition one of the PRA’s primary objectives.

EIOPA chair on the marriage of macro and micro policies

The chair of EIOPA, Gabriel Bernardino, published an article looking at the tensions and interactions between macroprudential and microprudential approaches to supervision. Mr Bernardino argues that a focus on microprudential supervision alone is not enough to ensure financial stability, and says well defined objectives, adequate co-ordination and co-operation, and a proper regulatory framework are required.

EIOPA recommends simplifications to the calculation of capital requirements

EIOPA submitted its first set of advice to the European Commission on the review of specific items in the Solvency II Delegated Regulation. The advice makes recommendations to simplify the calculation of capital requirements in the Solvency Capital Requirement (SCR) standard formula.

EIOPA has published two wide-ranging interviews given by its chair, Gabriel Bernardino. Mr Bernardino discusses the methodology and purpose of stress tests, the rise of InsureTec and the need for new regulations to take IT changes into account when setting implementation timescales.

PRA authorisation and supervision of insurance special purpose vehicles

The PRA published a policy statement (PS) ‘Authorisation and supervision of insurance special purpose vehicles’ (PS26/17) which feeds back on responses to consultation paper 42/16 and sets out the PRA’s final approach and expectations in relation to the authorisation and supervision of insurance special purpose vehicles (ISPVs), subject to the Risk Transformation Regulations 2017 (RTR) being passed through Parliament.

FCA sets out a new regulatory framework for insurance-linked securities

The FCA published policy statement PS17/24, which sets out its near-final rule changes required to the FCA Handbook to incorporate the new regulated activity of insurance risk transformation.

Payments services and systems

The European Payments Council (EPC) published a consultation paper containing a revised version of its mobile contactless Single Euro Payments Area (SEPA) card payments interoperability implementation guidelines. These guidelines are designed to be a reference for all stakeholders working on mobile contactless payments in Europe (based on card payments).

EBA consults on draft RTS on cooperation and exchange of information under PDS2

The European Banking Authority (EBA) is consulting on draft regulatory technical standards (RTS) which specify the framework for cooperation and the exchange of information between competent authorities under the revised Payment Services Directive (PSD2). The RTS also clarify the type of information as well as the templates to be used by payment institutions when reporting to the competent authorities of the host Member States on the payment business activities carried out in their territories. The consultation runs until 5 January 2018.

Fintech

Bitcoin futures market to be launched by CME Group

Derivatives marketplace the CME group announced the upcoming launch of bitcoin futures in Q4 2017, pending all relevant regulatory review periods. The new contract will be cash-settled and based on the CME CF bitcoin reference rate (BRR), which serves as a once-a-day reference rate of the US dollar price of bitcoin.

The FSB has published a report that considers the financial stability implications of the growing use of artificial intelligence (AI) and machine learning in financial services. AI and machine learning are being used in a range of applications across the financial system to assess credit quality, to price and market insurance contracts and to automate client interactions.

Dates for your diary

Date

Subject

Event

3 November 2017

Payment Services Directive 2

Deadline for responses to EBA consultation on draft guidelines for fraud reporting requirements.

Brexit

The European Council called for the EU and UK to ‘consolidate the convergence’ achieved in the first five rounds of negotiations to be able to move to the second phase of negotiations as soon as possible. Taking into account the assessment presented by the Michel Barnier and reaffirming its guidelines of 29 April 2017, the European Council welcomed the progress made on citizen’s rights and Ireland, particularly the protection of the Good Friday Agreement. However, the Council notes that while the UK has stated it will honour its financial obligations, there has not been a firm and concrete commitment to settle these obligations.

The House of Commons Treasury Committee launched a new inquiry into the UK’s economic relationship with the EU. The inquiry will consider transitional arrangements, preparedness for ‘no deal’, and the long-term economic relationship. The first evidence session was held on 25 October 2017.

The chief executive of TheCityUK, Miles Celic was scheduled to appear before the House of Lords EU Select Committee on 24 October 2017 to give evidence on the implications of a ‘no deal’ Brexit, for the financial services sector and the economy as a whole. The evidence session formed part of the ongoing inquiry, ‘Brexit: deal or no deal’? which is examining the key components of any implementation, or transition period and the consequence of a failure to reach an agreement.

Lords to hear CCP sector evidence on Brexit

The CEO of the London Clearing House, Daniel Maguire, and the head of Europe at the Futures Industry Association, Simon Puleston Jones, gave evidence to the House of Lords’ EU financial affairs sub-committee concerning the UK’s central counterparty (CCP) sector and Brexit on 25 October 2017.

Financial Conduct Authority updates

FCA Regulation round-up—October 2017

The Financial Conduct Authority (FCA) published the October 2017 edition of its regulation round-up. Topics discussed include the FCA’s work to implement the Insurance Distribution Directive (IDD) in the UK. The round-up also includes information on the extension of the Senior Managers and Certification Regime (SM&CR) and the launch of the FCA’s Asset Management Authorisation Hub.

FCA announces latest Handbook changes

The FCA published Handbook Notice No 48, which includes changes to the FCA Handbook and other materials made by the FCA board in September and October 2017, together with feedback on consultations that will not have a separate policy statement published by the FCA. It also describes changes made by the Board of the Financial Ombudsman Service (FOS) to its rules, guidance and standard terms on 11 September 2017.

Regulatory architecture

European Commission presents its 2018 work programme

Following President Juncker’s state of the union address in September 2017, the European Commission adopted its 2018 work programme, with plans to complete the President’s ten political priorities before the end of its mandate. The work programme offers a number of proposals that follow on from regulatory fitness and performance reviews of current laws, with a number of main focuses for achieving its goals.

Treasury Select Committee launches women in finance inquiry

The Treasury Committee launched a new inquiry into women in finance, focusing on HM Treasury’s Women in Finance Charter and the progress made against it.

Council endorses delegated regulation on contributions to the SRB

The General Secretariat of the Council of the EU recommended that the Council confirm that it would not object to the delegated regulation adopted by the European Commission on 14 September 2017 on the final system of contributions to the administrative expenditures of the Single Resolution Board (SRB).

ECON publishes draft report on banking union

The Committee on Economic and Monetary Affairs of the European Parliament (ECON) published a draft resolution ‘Banking Union—Annual Report 2017‘ covering developments since the European Parliament’s ‘Banking Union—Annual Report 2016’ adopted in February 2017. The draft report focuses on supervision of the banking sector, development of the regime for resolution of failing banks and deposit insurance.

EU Presidency asks for views on strengthening supervision

The Council of the EU published a Presidency issues note of the Economic and Financial Affairs Council (ECOFIN) meeting, to be held on 7 November 2017, with regard to the Review of the European System of Financial Supervision (ESFS). The Presidency requests Ministers to express views as to how the powers of the European Supervisory Authorities (ESAs) should be strengthened, and those elements of the ESFS review package which should be prioritised.

ECB chair calls for global co-operation on banking regulation

The chair of the supervisory board of the ECB, Danièle Nouy, gave a speech calling for greater co-operation between supervisors, particularly in relation to multinational banks, saying supervisors need to share information, agree on risk assessments, prepare for potential crises and learn from each other. Ms Nouy said it would be a ‘serious mistake’ to believe that national rules will be enough and called on all countries to follow through with Basel III and finalise it as quickly as possible.

Prudential requirements

The European Commission published a draft implementing regulation on the extension of the transitional periods related to own funds requirements for exposures to CCPs set out in the Capital Requirements Regulation (EU) 575/2013 (CRR) and the European Market Infrastructure Regulation (EU) 648/2012 (EMIR). The draft implementing regulation extends to 15 June 2018 the transitional periods under Article 497(2) of CRR and Article 89(5a) of EMIR.

The European Commission adopted a delegated regulation specifying the conditions according to which a competent authority will set the threshold for the materiality of a credit obligation past due for the purpose of the identification of default in accordance with Article 178(1)(b) of the CRR. The delegated regulation is based on draft regulatory technical standards (RTS) submitted by the European Banking Authority (EBA) in September 2016.

The Prudential Regulation Authority (PRA) published a clarification on the 2017 stress test scenario regarding how firms should incorporate IFRS 9 into the stress testing and capital planning carried out as part of their ICAAP obligations from 2018. The clarification applies to firms to which the Capital Requirements Directive IV (CRD IV) applies and which apply any of the IFRS, FRS 101 or FRS 102 and which have opted to use IFRS 9 for their financial instruments in relation to ICAAPs based on accounts as at 31 December 2017 or a later date.

Final guidelines on identification and management of step-in risk issued by the BCBS

The BCBS released the final guidelines on identification and management of step-in risk. This refers to the risk that a bank provides financial support to an entity beyond, or in the absence of, its contractual obligations should the entity experience financial stress.

BCBS reports on progress on adoption of the Basel regulatory framework

The Basel Committee on Banking Supervision (BCBS) published its 13th report on the progress made by Basel Committee members in adopting Basel III standards, as of end-September 2017. The report monitors the adoption of the standards into national law or regulation, in time for them to become effective by 2019.

ECON discusses progress of Basel III framework

ECON published a briefing note discussing the evolution of the Basel III framework and its ongoing revisions. Progress has been made in the areas including discussions over the net stable funding ratio (NSFR) and agreement.

IADI seeks feedback on research papers

The International Association of Deposit Insurers (IADI) is seeking views on two research papers. The papers look at resolution issues for financial co-operatives, and at Shariah governance for Islamic deposit insurance systems. Feedback is sought by 17 November 2017.

Risk management and controls

FCA to investigate Equifax Ltd cyber attack

The FCA announced that it is investigating the circumstances surrounding a cybersecurity incident that led to the loss of UK customer data held by Equifax Ltd on the servers of its US parent.

Financial crime

Former global head of HSBC’s foreign exchange cash trading found guilty of front-running

Mark Johnson, the former head of global foreign exchange cash trading at HSBC Bank plc, a subsidiary of HSBC Holdings plc (together HSBC) has been found guilty by a New York court of orchestrating a scheme to defraud an HSBC client through a multimillion-dollar scheme commonly referred to as ‘front running’.

FCA urges public to report and speak out against fraudulent investment schemes

The FCA urged the public to alert it if they have been contacted by a company offering what they think could be a fraudulent investment. The FCA request comes in response to new research showing that more than a fifth (22%) of over 55s surveyed who suspect they have been contacted about a fraudulent investment in the last three years, did not tell anyone about it. The most common reason given for not reporting was not knowing who to report to (49%).

SI 2018/Draft: A new code of practice (CoP) on the exercise of functions of certain regulatory bodies under the Proceeds of Crime Act 2002 will be brought into operation on 31 January 2018. This follows changes extending or creating functions, made by the Criminal Finances Act 2017.

Enforcement and redress

The FCA fined Merrill Lynch International (MLI) £34,524,000 for failing to report 68.5 million exchange traded derivative transactions under the European Market Infrastructure Regulation (EMIR) between 12 February 2014 and 6 February 2016. As MLI agreed to settle at an early stage of the investigation, it received a 30% reduction in the original £49,320,000 fine.

BrightHouse in £14.8m redress scheme

Rent-to-own firm BrightHouse (a trading name of Caversham Finance Limited), is to pay nearly £15m to customers for lending which may not have been affordable and payments which should have been refunded. The FCA identified in late 2014 that the firm’s lending application affordability assessment processes and collections processes did not always deliver good outcomes for customers, particularly those who were at a higher risk of falling into financial difficulty.

FCA bans debt management pair for misappropriating client money

The FCA banned Adrian and Christine Whitehurst, former directors of debt management firm First Step Finance Limited for dishonestly misappropriating client money in pursuit of a luxury lifestyle.

FCA says over three million complaints were reported in first half of 2017

The FCA published the data on the number of complaints reported by firms for the first half of 2017. In total, 3.32 million complaints about financial services were recorded by firms in the first half of 2017. This compares to 3.04 million in the second half of 2016.

Attempt to judicially review the FCA’s PPI measures fails

Claims management company We Fight Any Claim’s attempt to judicially review the Financial Conduct Authority’s Payment Protection Insurance (PPI) measures has failed. The Court of Appeal declined permission to appeal against an Administrative Court decision refusing permission to bring the claim. The Court of Appeal’s decision is final and cannot be further reviewed or appealed.

Financial Ombudsman’s monthly round up available

The FOS published issue 142 of its monthly update. It contains articles on the FCA’s PPI campaign, Q2 statistics, Q&As, and details about upcoming events.

Markets and trading

The European Commission published a report to the European Parliament and Council on progress in international efforts to mitigate the risks associated with securities financing transactions (SFTs). The report concludes that recommendations by the Financial Stability Board (FSB) have largely been addressed in the EU through the adoption of the Securities Financing Transactions Regulation (SFTR) and other financial services legislation and guidelines, and so no further regulatory action is needed at this time.

The European Securities and Markets Authority (ESMA) published nine opinions agreeing the FCA’s proposed position limits for commodity derivatives under Article 57 of the Markets in Financial Instruments Directive 2014/65/EU (MiFID II). With effect from 3 January 2018, when MiFID II must be implemented into national law, limits will apply to the net position a person can hold in commodity derivative contracts.

ESMA updates its Q&As on prospectus issues

ESMA updated its Q&As on prospectus related issues. The changes do not relate to the substance of the Q&As and come as a result of the Prospectus Regulation (EU) 2017/1129 becoming applicable on 20 July 2017.

SMSG welcomes ESMA’s draft Prospectus Regulation technical advice

The Securities and Markets Stakeholder Group (SMSG) responded to ESMA’s consultations on the format and content of the prospectus and EU growth prospectus under the Prospectus Regulation. The SMSG says the draft technical advice ‘succeeds in realigning the technical requirements to the goals set out in level 1 while achieving the necessary continuity in the interest of supervision and practitioners’.

ESMA published a compliance table indicating which competent authorities comply or intend to comply with ESMA’s guidelines on the calibration of circuit breakers and publication of trading halts under MiFID II. The guidelines were published on 6 April 2017.

A draft European Parliament motion been published for a resolution to raise no objections to the Commission delegated regulation of 22 September 2017 amending Commission Delegated Regulation (EU) No 149/2013 with regard to RTS on indirect clearing arrangements.

The ECB published the results of the September 2017 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets (SESFOD). The survey found that, on balance, credit terms offered to counterparties in both securities financing and OTC derivatives transactions over the three-month reference period remained basically unchanged. There was also little change reported in market liquidity and functioning, but respondents did report less favourable non-price terms and conditions in new or renegotiated OTC derivatives master agreements.

Event: The European Securities and Markets Authority (ESMA) Conference: The State of European Financial Markets

ESMA made available a video of its conference on the state of European financial markets, which took place in Paris on 17 October 2017. The video includes all the keynote addresses, panel debates and Q&A sessions.

Banks and mutuals

SR 2017/217: Sections 4, 8 and 16(1)(b)), and Part 2 of Schedule 1 to the Credit Unions and Co-operative and Community Benefit Societies Act (Northern Ireland) 2016 (CCBSA (NI) 2016) come into force on 6 April 2018.

FCA updates on the strategic review of banking business models

The FCA provided further detail on its strategic review of banking business models, originally launched in April 2017 as a programme of discovery work—the Strategic review of retail banking business models.

Nicky Morgan chides FCA over GRG report delays

The chair of the Treasury Select Committee, Nicky Morgan MP, commented on the FCA’s publication of its summary of the independent review of RBS’s treatment of customers transferred to its Global Restructuring Group (GRG). Ms Morgan said the FCA had taken too long to publish the report and the summary was ‘not before time’.

Supervisory banking statistics second quarter 2017

The European Central Bank (ECB) published its aggregated supervisory banking statistics for the second quarter of 2017 and a note on the methodology used in preparing the statistics.

Consumer credit, mortgage and home finance

The government issued a call for evidence on its plan to create a six-week ‘breathing space scheme’ and statutory debt management plan. The new scheme could include legal protections that would shield individuals from further creditor action once a plan to repay their debts is in place. Views are sought by 16 January 2018.

FCA says review of debt management sector is underway

The FCA announced it is undertaking a thematic review of the debt management sector, in line with the commitment in the regulator’s 2017/18 business plan.

Investment funds and wealth management

European Commission makes request to ESMA on fund performance

ESMA received a request from the European Commission asking the European Supervisory Authorities (ESAs)—namely the EBA, the European Insurance and Occupational Pensions Authority (EIOPA), and ESMA itself—to issue recurrent reports on the cost and past performance of the main categories of retail investment, insurance and pension products.

ESMA report finds big drop in mutual fund returns

ESMA carried out a first analysis on fund performance measures, developing initial metrics to analyse the impact of ongoing fees, one-off charges and inflation on the returns of mutual funds. Key preliminary results for the EU fund industry show a substantial reduction in net returns available to investors, especially in the retail sector, and weakly cost- or price-sensitive investment decisions by retail investors.

FCA executive discusses competition in the asset management sector

The executive director of strategy and competition at the FCA, Christopher Woolard, delivered a speech on competition in the asset management industry at the Securities Industry and Financial Markets Association’s 2017 Annual Meeting. Mr Woolard set out how the FCA has devised a package of reforms that aim to ensure enhanced protection for investors, greater clarity on what they’re buying and a better understanding of what they’re paying.

Insurance and pensions

PRA publishes CP21/17 on Solvency II matching adjustment

The PRA published the first in a short series of consultation papers on reform to the implementation of the Solvency II Directive (Directive 2009/198/EC), starting with the matching adjustment (MA). MA has the effect of cushioning certain life insurers’ capital resources, subject to conditions and prior approval, when they can demonstrate that the cash flow of a designated portfolio of assets is matched to the life insurance liabilities. The consultation closes on 31 January 2018.

EIOPA reports on internal model consistency projects

EIOPA published an update on internal model consistency projects (IMCPs), which aim to strengthen EU supervisory consistency and convergence. The update covers the progress of three related IMCPs: its market and credit risk benchmarking study, its modelling of sovereign exposures, and its modelling of dynamic volatility adjustment.

EIOPA adds more Q&As on Solvency II level 2 measures

EIOPA published two new Q&As on Commission Implementing Regulation (EU) 2015/2450 with regard to the templates for the submission of information to the supervisory authorities according to the Solvency II, and three Q&As on Commission Delegated Regulation (EU) 2015/35 supplementing the Solvency II Directive.

FCA says firms are falling short of renewal expectations

The FCA expressed concern at the way general insurance firms have implemented the transparency in insurance renewals rules, which came into effect in April 2017. The FCA says the rules are ‘relatively straightforward’ and warns firms that upcoming changes such as the IDD and the SMCR are more complex. The FCA said firms and those accountable need to ensure that they effectively manage regulatory change, as under-preparation is ‘not acceptable’.

The International Association of Insurance Supervisors (IAIS) published tables showing the status of the Insurance Core Principles and ComFrame. The Insurance Core Principles and ComFrame are designed to provide a globally accepted framework for the supervision of the insurance sector. The tables form part of IAIS’ mission to promote effective and globally consistent supervision of the insurance industry, with the objective of developing and maintaining fair, safe and stable insurance markets for the benefit and protection of policyholders and to contribute to global financial stability.

A draft European Parliament motion, dated 19 October 2017, was published for a resolution to raise no objections to the Commission delegated regulation of 21 September 2017 supplementing the IDD with regard to information requirements and conduct of business rules applicable to the distribution of insurance-based investment products.

Crowden and another v QBE Insurance (Europe) Ltd

The claimants brought a claim against the defendant professional indemnity insurer (QBE), seeking an indemnity, under an insurance policy, in respect of an insured financial adviser’s liability to them for negligent investment advice concerning two financial instruments, the Keydata bond and the Meteor plan. The claimants had already obtained judgment against the financial adviser in respect of the investment advice it had received. The Commercial Court, in allowing (in part) QBE’s application for summary judgment, held that an insolvency exclusion in the insurance policy issued by QBE applied to exclude the financial adviser’s liability to the claimants in respect of the investment advice given concerning the investments. That was because, in each case, it had been the inability of the Keydata and the other relevant parties, to pay their debts as they had fallen due, which had given rise to the relevant claim, loss or liability. Accordingly, QBE bore no obligation of indemnity, under the policy, and the claimants had no real prospect of succeeding in their claim against it. The judgement can be found at [2017] EWHC 2597 (Comm).

Pensions Dashboard to be taken forward by DWP

The Association of British Insurers welcomed confirmation from Pensions Minister Guy Opperman that the Department for Work and Pensions will take forward development of the Pensions Dashboard.

Fintech and virtual currencies

FCA reports on the first year of the regulatory sandbox

The FCA published a report outlining how the regulatory sandbox has met its objectives over the first year of operation. The report sets out the sandbox’s overall impact on the market, including the adoption of new technologies, increasing access and improving experiences for vulnerable consumers, and lessons learnt from individual tests.

Dates for your diary

Date

Subject

Event

27 October 2017

Pensions

Deadline for responses to EIOPA consultation on its quarterly and annual information requests towards the national supervisory authorities regarding the provision of occupational pensions information.

30 October 2017

Payment services and systems

Deadline for responses to the European Commission’s consultation on transparency and fees in cross-border transactions in the EU.

Deadline for the European Commission to submit to the European Parliament a report on Member States’ rules and supervisory authorities’ practices adopted.

31 October 2017

Solvency II Directive

End date of a transitional period during which the capital add-on, or the impact of the specific parameters the insurance or reinsurance undertaking required in accordance with Article 110 of Solvency II did not need to be separately disclosed.

Commission Delegated Regulation (EU) 2017/104 amending Delegated Regulation (EU) 148/2013 supplementing EMIR with regard to RTS on the minimum details of the data to be reported to trade repositories under Article 9(5) of EMIR, and

along with the updated validation rules for the reports submitted under the revised technical standards will apply from this date.

]]>http://blogs.lexisnexis.co.uk/fs/weekly-highlights-26-october-2017/feed/0http://blogs.lexisnexis.co.uk/fs/weekly-highlights-26-october-2017/Weekly highlights—19 October 2017http://feedproxy.google.com/~r/FinancialServicesBlog/~3/Lkf-tcaVfPk/
http://blogs.lexisnexis.co.uk/fs/weekly-highlights-19-october-2017/#respondThu, 19 Oct 2017 14:51:30 +0000http://blogs.lexisnexis.co.uk/fs/?p=7936Read More...]]>Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 19 October 2017.

Brexit

EBA issues opinion on Brexit relocation of authorities and institutions​

On 12 October 2017, the European Banking Authority (EBA) published an opinion on Brexit to ensure the consistent application of EU legislation to businesses seeking to establish or enhance their EU27 presence in order to retain access to the EU single market. In the opinion, the EBA addresses a number of relevant policy topics relating to authorisations, the prudential regulation and supervision of investment firms, internal models, outsourcing, internal governance, risk transfers via back-to-back and intragroup operations, and resolution and deposit guarantee scheme issues. The EBA will monitor how the opinion will be applied in practice by authorities and will continue its policy and risk analysis work in relation to the challenges posed by Brexit.

City experts to give Brexit evidence at Lords Select Committee

On 18 October 2017 the House of Lords Select Committee heard evidence from City experts on post-Brexit financial regulation and supervision. The Committee is examining how financial stability can be ensured, and whether the UK can gain equivalence or some other form of close relationship in order to preserve market access.

Calls for more progression on the UK/EU transition deal

On 17 October 2017, theCityUK published a warning that ‘the value of a transitional deal is disappearing by the day’. With the upcoming European Council meeting, TheCityUK is urging the UK and EU to come to make ‘rapid progress’ on reaching an agreement during the first quarter of 2018. It has outlined what the deal should do and addresses some of the issues that may arise if the UK and EU cannot come to an agreement on transition soon, such as more companies creating contingency plans which will see significant international investment and jobs being taken away from Europe.

Regulatory architecture

On 13 October 2017, the chair of the Treasury Committee, Nicky Morgan MP, wrote to the chief executive of the Financial Conduct Authority (FCA), Andrew Bailey, about the FCA’s forthcoming summary of the skilled persons’ report into the treatment of customers in RBS’s Global Restructuring Group (GRG). Ms Morgan has proposed an arrangement under which the Committee appoints a legal adviser—Andrew Green QC—to compare the FCA’s summary with the underlying report.

On 17 October 2017, Parliament published an exchange of letters (FCA to TSC and TSC to FCA) between the chair of the Treasury Committee, Nicky Morgan MP and the chief executive of the FCA, Andrew Bailey, on the FCA’s skilled person’s report into RBS’s Global Restructuring Group. The FCA continues to resist publication of the report due to a number of concerns, but has produced a summary version. Ms Morgan proposed on 13 October 2017 to appoint an independent legal adviser to assess whether the FCA’s summary was ‘a fair and balanced summary of the underlying skilled person’s report’.

Commission review of the SSM makes positive assessment

On 12 October 2017, the European Commission published a review of the most important aspects of the functioning of the single supervisory mechanism (SSM) for banks. It covers the governance and cost-effectiveness of the SSM, the methods and performance of the European Central Bank (ECB) in its supervisory role, and the interaction of the SSM with relevant EU and international bodies. The report provides an assessment of the setting up and functioning of the SSM, in view of determining its effectiveness as the first pillar of the banking union. The Commission comes to an ‘overall positive assessment’ of the SSM Regulation and the first years of the ECB acting in its supervisory capacity.

On 18 October 2017, HMRC reported that most banks have seen an increase in their tax liabilities in the period between 1 April 2016 and 31 April 2017. This follows the introduction of the bank surcharge on 1 January 2016. HMRC’s annual report on the code of practice on taxation for banks also lists the names of banks that have adopted the code as at 31 March 2017.

ESMA chair sets out CMU, convergence and risk data priorities

On 17 October 2017, the chair of the European Securities and Markets Authority (ESMA), Steven Maijoor, delivered a wide-ranging speech on the capital markets union (CMU), supervisory convergence and how the EU can improve its understanding of trends, risks and vulnerabilities in financial markets. Mr Maijoor also looked briefly at Brexit, saying the UK ‘will not become your average third country’.

ECB vice-chair on proportionality in regulation and the state of EU banks

The vice-chair of the supervisory board of the European Central Bank (ECB), Sabine Lautenschläger, delivered two speeches at an IMF seminar in Washington DC on 13 and 14 October 2017. In ‘Is small beautiful? Supervision, regulation and the size of banks’, Ms Lautenschläger examined the case for proportionality in banking regulation, concluding that smaller banks should be subject to fewer rules than larger banks, but should not be allowed to hold far less capital proportions, as they also need to remain resilient during an economic downturn. In ‘State of play in the European banking sector’ Ms Lautenschläger said EU banks are better capitalised and have improved their liquidity situation and their governance, and are making slow but steady progress in tackling all the well-known challenges and adapting their business models.

ECB chair says banking union vital to help sector face its challenges

On 18 October 2017, the ECB published a speech given by the chair of the ECB’s supervisory board, Danièle Nouy at a high-level meeting on global and regional supervisory priorities in Basel, saying that while regulation has mostly been driven in recent years by the financial crisis, other factors are involved now, such as digitalisation. Ms Nouy said there were also challenges that stem from before the crisis, including the size of the banking sector, and called for consolidation.

Central bank officials speak on the future of financial regulation

Two representatives from leading central banks have spoken at the ‘Rethinking Macroeconomic Policy IV’ conference in Washington DC about the impact of regulatory reform since the financial crisis, and challenges for the future. The chief economist at the Bank of England (BoE), Andrew Haldane, and Benoît Cœuré, a member of the executive board of the European Central Bank (ECB), argue that while the current system of ‘multipolar regulation’ may be effective, the potential trade-offs need to be better understood.

AFME welcomes Commission’s call to complete the banking union

On 12 October 2017, the Association for Financial Markets in Europe (AFME) published a response to the European Commission’s call for urgent completion of the EU banking union, saying it fully supports the Commission’s communication. Clear improvements in financial stability safeguards have been made, AFME said, with banks now much less likely to fail. The priority now should be enabling efficient internal capital allocation within cross-border banks so that resources can flow to where they are most needed by European households, SMEs, and corporates.

Authorisation, approval and supervision

Commission seeks views on its reporting requirements roadmap

On 17 October 2017, the European Commission published an evaluation roadmap for its fitness check of EU reporting requirements in the financial sector, having received feedback from stakeholders that requirements were not fully aligned with one another. This makes reporting unnecessarily complex, costly, and burdensome. Comments on the roadmap are sought by 14 November 2017.

PRA updates 2017/18 fee year information

On 16 October 2017, the Prudential Regulation Authority (PRA) issued an update to consultation paper CP16/17: PRA fees and levies: model transaction fees, fees and Financial Services Compensation Scheme (FSCS) levies for insurers and fees for designated investment firms (the CP), first issued in August 2017. The CP sets out the PRA’s proposals relating to periodic fees for designated investment firms, periodic fees and FSCS levies for insurers, and fees in relation to models.

Prudential requirements

On 13 October 2017, the The EBA published a compliance table indicating which competent authorities comply or intend to comply with the EBA’s guidelines on the collection of information related to the internal capital adequacy assessment process (ICAAP) and the internal liquidity adequacy assessment process (ILAAP). The guidelines were published on 3 November 2016.

On 18 October 2017, the EBA updated its list of public sector entities (PSEs) that may be treated as regional governments, local authorities or central governments for the calculation of capital requirements, in accordance with the EU Capital Requirements Regulation (CRR).

HMT and BoE update MoU on resolution planning

On 17 October 2017, HM Treasury published an updated version of its memorandum of understanding on resolution planning and financial crisis management with the Bank of England. The update makes some amendments to the April 2017 version.

Risk management and controls

Treasury Committee criticises Equifax’s data breach response

On 18 October 2017, the Treasury Committee published details of a letter from its chair, Nicky Morgan MP, to the chief executive of Equifax Limited asking for further details about the scale of the cyber-security breach, and what compensation it will provide. Ms Morgan said Equifax had taken too long to notify those affected by the widespread breach, which has increased the risk that they fall victim to identity theft and fraud.

FSB report examines national cybersecurity strategies

On 16 October 2017, the Financial Stability Board (FSB) published a summary report on financial sector cybersecurity regulations, guidance and supervisory practices following the results of a stocktake on cybersecurity. The report, accompanied by a detailed analysis of the results of the stocktake, was delivered at the meeting of G20 finance ministers and central bank governors in Washington DC on 14 October 2017.

ECB paper examines relation between zombie firms and stressed banks

On 12 October 2017, the ECB published a study of zombie firms and stressed banks, investigating the impact of bank stress on the deleveraging process of non-financial small and medium-sized enterprises (SMEs), with a focus on euro area periphery countries. It shows that the speed and type of corporate deleveraging depends on the interaction between corporate and financial sector health. The paper suggests that stressed banks in poorly performing economies might be more inclined to conduct risky lending to distressed borrowers, ‘possibly in attempts to gamble for resurrection’.

FIA welcomes US bid to protect access to source code

On 12 October 2017, the Futures Industry Association (FIA) published a press release stating it had joined with the Modern Markets Initiative (MMI), the International Swaps and Derivatives Association (ISDA), and the US Chamber of Commerce to express for Congressman Sean Duffy’s legislation to protect access to source code. The bill would require the US Securities and Exchange Commission to obtain a subpoena in order to compel a person to produce or furnish algorithmic trading source codes or other similar intellectual property.

Financial crime

On 17 October 2017, the European Commission opened up a public consultation into speeding up financial investigations to combat organised crime more effectively. The Commission hopes that by speeding up the identification of bank accounts the proceeds of crime can be traced, frozen and confiscated even when transferred to bank accounts located in different countries. The consultation will close on 9 January 2018.

Enforcement and redress

On 18 October 2017, the FCA fined Rio Tinto plc £27.4m for breaching Disclosure and Transparency Rules by failing to carry out an impairment test and to recognise an impairment loss on the value of mining assets it had acquired in its 2012 interim results. In the US, the company and two former executives face SEC fraud charges. Both the US and UK actions relate to the Mozambique investment made by the mining firm in 2011. The FCA found that had Rio Tinto complied with its obligation to carry out the test, a material impairment would have been required to have been disclosed at the time of its 2012 half year financial reporting. Rio Tinto’s financial reporting was therefore inaccurate and misleading.

FCA bans husband and fines and bans wife for lack of integrity

On 12 October 2017, the FCA published final notices which state that the regulator has banned Mrs Colette Marie Chiesa and Mr John Andrew Gerard Chiesa from working in financial services for integrity failings. Additionally, Mrs Chiesa has been fined £50,000 for attempting to mislead the FCA during an FCA interview.

Markets and trading

EMIR amendments on third-country recognition published in the Official Journal

Commission Implementing Decision (EU) 2017/1857 of 13 October 2017 on the recognition of the legal, supervisory and enforcement arrangements of the USA for derivatives transactions supervised by the Commodity Futures Trading Commission as equivalent to certain requirements of Article 11 of Regulation (EU) No 648/2012 of the European Parliament and Council on OTC derivatives, central counterparties and trade repositories (EMIR) was published in the Official Journal of the EU. The decision shall enter into force on the twentieth day following that of its publication in the Official Journal.

Commission and CFTC agree common derivatives approach

On 13 October 2017, the European Commission published a press release stating that the Commission and the US Commodity Futures Trading Commission (CFTC) have agreed on a common approach regarding certain derivatives trading platforms, and the Commission has adopted an equivalence decision regarding the US framework for non-cleared over-the-counter derivatives. Together with a similar decision by the CFTC for the EU framework, the aim is to avoid a double regulatory burden for these transactions both in the EU and in the US.

Commodity derivative position limits exemption application now available

The position limits exemption application is now available for completion on the Financial Conduct Authority (FCA)’s Connect webpage. The position limits and reporting regime for commodity derivatives comes into force on 3 January 2018 (Articles 57 and 58 of MiFID II). The regime aims to prevent market abuse and support orderly pricing and settlement conditions by improving transparency and oversight of financial markets.

ECB opinion on EMIR revision

On 17 October 2017, the European Central Bank (ECB) has issued an opinion on the Commission’s proposal for a regulation amending the European Market Infrastructure Regulation (EU) 648/2012 (EMIR). The ECB generally supports the Commission’s initiative to introduce a number of targeted modifications to EMIR with a view to simplifying the applicable rules and eliminating disproportionate burdens.

Reformed SONIA will be implemented on 23 April 2018

On 16 October 2017, the Bank of England confirmed that its reforms to the sterling overnight index average (SONIA) interest rate benchmark will take effect on Monday 23 April 2018. The reforms will see the Bank taking on the end-to-end administration, including the calculation and publication of SONIA. The coverage of SONIA will be broadened to include overnight unsecured transactions negotiated bilaterally, as well as those arranged via brokers, using the Bank’s sterling money market data collection as the data source.

On 18 October 2017, the European Commission asked the European Supervisory Authorities to issue recurrent reports on the cost and past performance of the main categories of retail investment, insurance and pension products. The Commission says that this would contribute to the objective of the capital markets union action plan to foster the participation of retail investors in capital markets by supporting the assessment of the net return of retail investment products and the impact of diverse fees and charges.

On 17 October 2017, the International Swaps and Derivatives Association (ISDA) published a conceptual version of its ISDA Common Domain Model (CDM). The ISDA CDM aims to be a first step towards realising the potential for new technologies such as distributed ledger and smart contracts to replace current derivatives market infrastructures, which ISDA describes as old, complex, duplicative and heavily reliant on manual intervention and reconciliation.

FCA responds to Treasury Committee questions on Saudi Aramco listing

On 13 October 2017, the chief executive of the FCA, Andrew Bailey, responded to a letter from the chair of the Treasury Committee, Nicky Morgan MP, and the chair of the Business, Energy and Industrial Strategy Committee, Rachel Reeves MP, about the FCA’s consultation on proposals to create a new category within its premium listing regime. For further information see LNB News 13/10/2017 90.

ESMA releases FIRDS guide

On 16 October 2017, ESMA published an updated guide to the financial instruments reference data system (FIRDS). The guide contains instructions on access and download of full and delta reference data files.

ESMA updates information on Benchmarks Regulation register

On 13 October 2017, ESMA updated its Benchmarks Regulation webpage to include new information about its plans to publish a register of administrators and third-country benchmarks, in accordance with Article 36 of the Benchmarks Regulation.

EBA corrects portfolio identifier error in 2018 benchmarking exercise

On 12 October 2017, the EBA made corrections to annex 1 of its implementing technical standards (ITS) on benchmarking of internal approaches, which had been amended on 4 May 2017 to define the benchmarking portfolios for the 2018 benchmarking exercise. The EBA has eliminated some duplicate portfolio identifiers (IDs) which might lead to technical and practical problems for data validation and when mapping portfolio IDs to the relevant internal models applied by banks.

ICMA warns on MiFID II and Brexit dangers

On 13 October 2017, the International Capital Market Association (ICMA) warned in its latest quarterly reportthat market participants outside the EU may not yet fully appreciate the extraterritorial impact of MiFID II and that many are not yet ready to comply with its provisions, which come into effect on 3 January 2018.

On 17 October 2017, the ICMA welcomed a consultation report by the International Organization of Securities Commissions (IOSCO) on regulatory reporting and public transparency in the secondary corporate bond markets. While ICMA endorses IOSCO’s assertion that ‘public transparency and accessibility to information are key components of robust capital markets’, it adds that transparency is ‘not an end in itself’.

ESMA publishes responses to Prospectus Regulation consultations

On 13 October 2017, ESMA published the responses received to its three consultation papers on technical advice under the new Prospectus Regulation, which were published in July 2017. The consultation papers contained draft technical advice on the format and content of the prospectus, on the EU growth prospectus and on scrutiny and approval.

FMLC comments on SONIA as risk-free reference

On 12 October 2017, the Financial Markets Law Committee (FMLC) wrote to the Bank of England (BoE) concerning the BoE working group’s white paper, ‘SONIA as the RFR and approaches to adoption’. The FMLC takes the view that the issues of legal risk which have been addressed by the FMLC over the past five years could usefully bear further discussion and consideration in the context of some of the issues addressed in the white paper—in particular, with respect to the working group’s recommendation that the potential scope for the transition of legacy contracts which currently reference LIBOR to the sterling overnight index average (SONIA) be explored.

FIA and ISDA comment on US Fed G-SIB surcharge capital requirements

On 12 October 2017, the Futures Industry Association (FIA) issued a press release, together with the International Swaps and Derivatives Association (ISDA), saying it has sent comments to the US Fed Board of Governors expressing serious concerns with proposed changes to the mandatory Banking Organization Systemic Risk Report form (FR Y-15) that would affect the treatment of client-cleared over-the-counter (OTC) derivatives transactions for purposes of the capital surcharge (the G-SIB surcharge) imposed on US global systemically important banking organisations (G-SIBs).

ESMA recruiting for the Securities Markets Stakeholders Group

On 16 October 2017, ESMA announced that it is seeking candidates to represent the interests of financial market participants (one post) and academics (one post), as members of its Securities Markets Stakeholders Group (SMSG). The SMSG helps to facilitate consultation between ESMA, its board of supervisors and stakeholders on ESMA’s areas of responsibility, and provides technical advice on policy development. This helps to ensure that stakeholders can contribute to the formulation of policy from the beginning of the process.

Consumer credit, mortgage and home finance

FCA reveals results of Financial Lives Survey

On 18 October 2017, the FCA published the results of its Financial Lives Survey 2017, the FCA’s largest tracking survey of consumers and their use of financial services. The aim of the survey is to provide the FCA with unique insights into people’s experiences of retail financial products and services, and ultimately help the FCA meet its objectives. It draws on responses from just under 13,000 UK consumers aged 18 and over.

FCA launches ageing population occasional paper

On 16 October 2017, the FCA published details of a speech given by its director of life insurance and financial advice,, Linda Woodall, given to mark the launch of the Ageing Population occasional paper. Ms Woodall said that while older consumers have diverse needs and preferences and there is no ‘one size fits all’ solution, there are some issues and access barriers that are more relevant for older consumers. The FCA’s research found that older consumers’ financial services needs are not being fully met, resulting in exclusion, poor customer outcomes and potential harm.

FCA delays publication of mortgages market study reports

On 13 October 2017, the FCA updated its mortgages market study webpage, indicating that it now expects to publish the interim report in spring 2018 and the final report in Q4 2018.

Insurance and pensions

ECON proposes postponement of IDD application date

On 17 October 2017, the Committee on Economic and Monetary Affairs of the European Parliament (ECON) announced that it has approvied draft no-objection decisions for two delegated regulations under the Insurance Distribution Directive (EU) 2016/97 (IDD), which include requests for the European Commission to assess whether the application date of IDD can be postponed to 1 October 2018. ECON has not proposed moving the deadline for transposition of IDD from 23 February 2018.

Solvency II: Data collection of market risk sensitivities—PS25/17

On 17 October 2017, the PRA published a policy statement (PS) which provides feedback on responses to consultation paper 7/17 ‘Solvency II: Data collection of market risk sensitivities’ and includes a link to the final supervisory statement 7/17.

PRA publishes feedback from Solvency II roundtables

On 18 October 2017, the PRA announced that it had held three roundtables in September 2017 inviting insurers, investors, credit analysts, and equity analysts to discuss the first round of Solvency and Financial Condition Reports (SFCRs) published by EU insurers in 2017.

Corrigendum to risk calibration regulation published in the Official Journal

On 13 October 2017, a corrigendum to Commission Delegated Regulation (EU) 2017/1542 of 8 June 2017 amending Delegated Regulation (EU) 2015/35 concerning the calculation of regulatory capital requirements for certain categories of assets held by insurance and reinsurance undertakings (infrastructure corporates) was published in the Official Journal of the EU.

On 13 October 2017, Draft regulations were published implementing a new regulatory and tax framework for insurance linked securities have been laid before Parliament. The draft Risk Transformation Regulations 2017 and Risk Transformation (Tax) Regulations 2017 are intended to help cement the UK’s position at the forefront of the global reinsurance business.

FSB reports on European private pension schemes

On 17 October 2017, the Financial Stability Board (FSB) has published a report by the FSB Regional Consultative Group for Europe on the functioning, vulnerabilities and future challenges for private pension schemes in Europe. The report considers the heterogeneous nature of private pension systems across Europe, the different regulatory regimes and the vulnerabilities that they could be exposed to. It aims to provide a solid basis for discussions on the features characterising pension schemes that may impact the functioning and the stability of the financial system and therefore the real economy, along with possible ways to improve their robustness, resilience and efficiency.

ABI calls for firm government direction on pensions dashboards

On 13 October 2017, a roadmap of what needs to be done to give everyone in the UK online access to all of their pension information was been set out by the Association of British Insurers, as it calls for firm government direction on its plans for pensions dashboards.

Payment services and systems

EBA sets out PSD2 complaints procedures

On 13 October 2017, the EBA has published final guidelines on the complaints procedures to be followed by competent authorities (CAs) to ensure effective compliance by payment service providers (PSPs) with the revised Payment Services Directive (PSD2). The guidelines govern the process through which payment service users and other interested parties can submit complaints to CAs with regard to PSPs’ alleged infringements of PSD2.

PSR pushes consultation back a month

After reviewing the responses it received to its August 2017 consultation on regulatory fees, on 16 October 2017, the Payment Systems Regulator (PSR) announced it will require more time before it publishes the next consultation. The PSR says it wants to consider the proposals in greater depth and identify the right balance among stakeholder views.

Wolfsberg Group updates aim for clarity in correspondent banking and payment services

On 17 October 2017, the Wolfsberg Group has updated its correspondent banking due diligence questionnaire. The Group’s member banks have settled on one due diligence standard for international correspondent banking which is being made available to know-your-client utilities and the wider banking community. The Group has also updated its Payment Transparency Standards. The revised standards clarify roles, responsibilities and expectations on originators, eg what it means to include name, address and account number. The standards also set out expectations on intermediaries and beneficiaries, ‘on behalf of’ payments and Money or Value Transfer Services, and provide a view on the use of legal entity identifiers.

EPC SEPA Direct Debit Core rulebook version 1.1

On 18 October 2017, the European Payments Council (EPC) published an updated version of the 2017 Single Euro Payments Area (SEPA) Direct Debit (SDD) rulebook, which replaces version 1.0, and takes effect on 19 November 2017. Version 1.0 of the SDD rulebook was originally published in November 2016 along with the SEPA Credit Transfer rulebook.

Fintech and virtual currencies

Report calls for special deal for FinTech sector

On 13 October 2017, the City of London Corporation, with KPMG, released a report calling on the government to secure a sector deal for FinTech to further cement the UK’s position as a global leader in this area. The report recommends that industry work with government to develop a single policy vision for the sector, co-ordinated open standards, enhanced regional engagement and talent development, and greater access to capital for FinTech businesses.

CFTC’s LabCFTC releases primer on virtual currencies

On 18 October 2017, the US Commodity Futures Trading Commission (CFTC) released ‘A CFTC primer on virtual currencies’. This is the first of a series that LabCFTC will release to provide fundamental information about FinTech innovation. LabCFTC was launched by the CFTC in May 2017 and aims to facilitate market-enhancing FinTech innovation, fair market competition, and proactive regulatory excellence and understanding of emerging technologies.

Malaysian central banker discusses role of FinTech in Islamic finance

On 17 October 2017, the Bank of International Settlements published a speech given by the assistant governor of the Central Bank of Malaysia, Marzunisham Omar, on Islamic finance and FinTech, in Kuala Lumpur on 11 October 2017. Mr Omar said the sector is still in its infancy but growing, with an increasing number of FinTech start-ups, innovation labs and incubators that are based on the values and principles of Islamic finance. FinTech has much to offer the sector, Mr Omar said, highlighting its role in creating risk-based economies, bringing new sources of capital into play, and enabling the matching of funds within the social financing space.

Deadline for responses to the European Commission’s public consultation on the development of secondary markets for non-performing loans and distressed assets and protection of secured creditors from borrowers’ default.

http://blogs.lexisnexis.co.uk/fs/weekly-highlights-19-october-2017/feed/0http://blogs.lexisnexis.co.uk/fs/weekly-highlights-19-october-2017/Weekly highlights—12 October 2017http://feedproxy.google.com/~r/FinancialServicesBlog/~3/QdNcATxsk8Y/
http://blogs.lexisnexis.co.uk/fs/weekly-highlights-12-october-2017/#respondThu, 12 Oct 2017 15:30:18 +0000http://blogs.lexisnexis.co.uk/fs/?p=7932Read More...]]>Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 12 October 2017.

Brexit

PRA CEO discusses Brexit and the global nature of financial services

The deputy governor for prudential regulation and CEO of the Prudential Regulation Authority (PRA), Sam Woods, gave a speech on the impact of borders, location and distance on the shape of banks, insurers and financial regulation. Defining ‘geofinance’ as the impact of geography on the geometry of finance, Mr Woods said that with the revolution in regulation following the financial crisis coming to its end, and with changes to the geopolitical landscape looming large, the concept is likely to be the defining challenge of the next few years. Mr Woods also looked in detail at the potential impact of Brexit on UK and EU banks and insurers.

The EU Financial Affairs Sub-Committee took evidence from law firms specialising in international corporate and commercial law. The discussion covered the range of legal options available to a post-Brexit UK for EU market access, different kinds of transition period and their risks, returns and practicalities, and the role of UK regulators upon exit.

Brexit is ‘unlikely’ to effect UK consumer rights

The Law Society gave its views on the effect of the UK leaving the EU on consumers and consumer protection. In its opinion as the most consumer protection legislation is already UK legislation, Brexit is ‘unlikely to have a significant impact on domestic consumer rights in the immediate future’. The Society’s main concerns regard the uncertainties around consumers undertaking travel abroad or making EU cross-border transactions.

Parliament published on 11 October 2017 a letter from the chancellor of the exchequer, Philip Hammond, to the chair of the Treasury Committee, Nicky Morgan, dated 20 September 2017, regarding the impact of the UK’s withdrawal from the EU on insurance contracts that run beyond the point of the UK’s exit.

ESMA chair on preparations for MiFID II, Brexit and equivalence

The chair of ESMA, Steven Maijoor, made a statement to the Economic & Monetary Affairs Committee (ECON) setting out ESMA’s readiness for MiFID II implementation in January 2018, its preparations for Brexit, and the third country equivalence regime. Mr Maijoor said ESMA was monitoring Brexit-related relocations to ensure there was no regulatory arbitrage between the EU-27 Member States seeking to attract this business.

Financial Conduct Authority updates

FCA policy development update for October 2017

The Financial Conduct Authority (FCA) published the latest version of its policy development update, which provides information on its recent and upcoming publications. Future publications include policy statements on implementation of the Insurance Distribution Directive (IDD), which are expected in December 2017 and January 2018.

Regulatory architecture

Commission sets out path towards completion of the Banking Union

The European Commission called for the completion of all parts of the Banking Union by 2018, saying European citizens and businesses will benefit from deeper financial integration and a more stable financial system. In a Communication that seeks to ensure agreement on all outstanding elements, the Commission suggests new measures to reduce non-performing loans and to help banks diversify their investments in sovereign bonds. It also sets out ideas to facilitate progress in the European Parliament and the Council on steps towards a European deposit insurance scheme (EDIS)—‘a vital missing element of the Banking Union’—guaranteeing citizens’ deposits at a central level.

EBA publishes work programme for 2018

The European Banking Authority (EBA) published its detailed annual work programme for 2018, describing the specific activities and tasks of the Authority for the coming year, as well as a multiannual work programme, highlighting the key strategic areas of work from 2018 to 2021.

ESMA’s 2018 work programme includes focus on data quality

The European Securities and Markets Authority (ESMA) released its work programme for 2018, which sets out its priorities and areas of focus for 2018. The work programme reflects ESMA’s shift from building a single rulebook for EU financial markets to promoting supervisory convergence and assessing risks. However, ESMA warns that possible changes proposed under the ESAs and CCP Reviews and planning for Brexit could require it to adapt and reprioritise its efforts.

Valdis Dombrovskis says EU working on a ‘comprehensive strategy’ for green finance

The vice-president of the European Commission, Valdis Dombrovskis, spoke at the ECOFIN press conference in Luxembourg on the EU’s need for more capital for green and sustainable projects. In order to meet environmental targets, Mr Dombrovskis said private as well as public investment was essential, and to facilitate a systemic change, the EU needs to change the investment culture altogether. In early 2018, the Commission will present a ‘comprehensive strategy’ for sustainable and green finance in the EU, looking at, among other options, EU-wide green labels, classification for green assets, integrating sustainability into the investment chain and credit ratings, and the ‘green supporting factor’.

FSB reviews 2017-18 work plan at Berlin meeting

The Financial Stability Board (FSB) reviewed its workplan for 2017-18 at its plenary in Berlin, including the potential themes for the finance track of the Argentine G20 presidency in 2018. The plenary agreed that the FSB, in co-ordination with the relevant standard-setting bodies, should undertake an evaluation of the effects of reforms on financial intermediation.

Commission opinion on ECB clearing system amendment published in the Official Journal

A European Commission Opinion of 3 October 2017 on the Recommendation of the European Central Bank (ECB) for a Decision of the European Parliament and of the Council amending Article 22 of the Statute of the European System of Central Banks and of the ECB has been published in the Official Journal. The Commission welcomes the initiative of the ECB to recommend an amendment to Article 22, in order to allow the ECB to regulate clearing systems for financial instruments, for monetary policy purposes.

ESAs joint committee chair sets out progress and priorities

The chair of the Joint Committee of the European Supervisory Authorities (ESAs), Andrea Enria, gave a speechsetting out the work of the committee, and saying the three main areas for supervisory concern are political uncertainty and fragmentation, not least in the light of the UK’s withdrawal from the EU, persistent valuation risk, also related to an uncertain outlook for yields, and the low profitability of financial institutions.

Commission lists outstanding financial services infringements

The European Commission published a list of legal actions it is taking against Member States for failing to comply with their obligations under EU law. These decisions, covering various sectors and EU policy areas, aim to ensure the proper application of EU law for the benefit of citizens and businesses.

Dietrich Domanski to be new FSB secretary general

The Financial Stability Board (FSB) appointed Dietrich Domanski as its new secretary general. Mr Domanski is currently deputy head of the monetary and economic department and head of economic analysis at the Bank for International Settlements, and has held previous positions in the Bundesbank and as an adviser at the International Monetary Fund.

Prudential requirements

EBA consults on reporting for resolution plans

The EBA opened a consultation on amending the implementing technical standards (ITS) on the information which institutions must provide to resolution authorities for the purpose of drawing up and implementing resolution plans. The consultation runs until 11 December 2017.

PRA publishes CP20/17 on changes to its large exposures framework

The PRA published consultation paper CP20/17, which sets out the PRA’s proposed changes and clarifications to requirements relating to intragroup transactions in the Large Exposures (LE) Part of the PRA Rulebook. The PRA also proposes to update supervisory statement 16/13 ‘Large Exposures’ to reflect the updates to the PRA’s expectations.

The PRA published consultation paper CP19/17 concerning its groups policy framework. The PRA’s regulatory regime for banks includes prudential requirements relating both to individual legal entities (‘firms’) that undertake regulated activities such as deposit taking in the UK, and to the broader groups of which they form a part. The PRA has reviewed the groups policy framework, in order to ensure that it remains coherent and fit for purpose in light of post-crisis financial reforms—including Basel III standards, UK ring-fencing legislation, the resolution framework and other international developments. Following the review, the PRA is considering some necessary changes to achieve this objective.

ECON adopts draft report on BRRD amendment

The Committee on Economic and Monetary Affairs of the European Parliament (ECON) adopted a draft report on a proposal to amend the Bank Recovery and Resolution Directive 2014/59/EU (BRRD) as regards the ranking of unsecured debt instruments in insolvency hierarchies. The proposed amendment to BRRD was presented by the European Commission in November 2016 and relates to the implementation of the Financial Stability Board’s Total Loss-absorbing Capacity (TLAC) standard and the impact on the EU’s existing Minimum Requirement for Own Funds and Eligible Liabilities (MREL) requirement.

Council of the EU announces non-objection on CRR

The Council of the European Union announced that it would not object to the Delegated Regulation amending Regulation (EU) 575/2013 on bank capital requirements as regards the waiver on own funds requirements for certain covered bonds.

EBA updates interest rate risk compliance table

The EBA updated the table of compliance by national competent authorities (NCAs) with its guidelines on the management of interest rate risk arising from non-trading activities. The guidelines were published in May 2015.

State aid: Commission approves Portuguese restructuring plan and support for sale of Novo Banco

The European Commission approved the Portuguese restructuring plan and support for sale of Novo Banco (Case SA.34720). The restructuring plan will allow the new private owner to launch its restructuring plan aimed at ensuring the long-term viability of the bank, while limiting distortions to competition. The sale of Novo Banco completes the 2014 resolution of Banco Espírito Santo (BES). In August 2014, Portugal put BES into resolution under the Portuguese resolution framework and determined the strategy for its resolution. To enable an orderly resolution, Portugal designed several support measures, including State aid for the transfer of certain BES assets to a bridge bank, Novo Banco. The Commission concluded Portugal’s sales process of the bridge bank was open and competitive; Portuguese plans to grant additional State aid to finalise the BES resolution and bridge bank sale are in line with EU State aid rules; and the entity resulting from the sale of the bridge bank is viable in the long-term.

BIS sets Asian Infrastructure Investment Bank risk weight

The Bank for International Settlements (BIS) agreed that supervisors may allow banks to apply a 0% risk weight to claims on the Asian Infrastructure Investment Bank (AIIB), in accordance with paragraph 59 of International Convergence of Capital Measurement and Capital Standards: A revised Framework—Comprehensive Version, June 2006.

Risk management and controls

The EBA updated its risk dashboard, summarising the main risks and vulnerabilities in the EU banking sector through a set of risk indicators in Q2 2017. The EBA says non-performing loans are declining but progress is slow.

Financial crime

Crown Prosecution Service to apply for crime prevention orders on behalf of prosecuting authorities

A memorandum of understanding (MoU) been signed to enable the Crown Prosecution Service (CPS) to apply for serious crime prevention orders (SCPOs) on behalf of other prosecuting authorities. The MoU was signed between the CPS and the Food Standards Agency, the Insolvency Service, the Financial Conduct Authority, Natural Resources Wales, the Competition and Markets Authority and the Environment Agency, in order to establish a more robust operational process.

Enforcement and redress

FCA cancels firm’s permission and fines director after appeals fail

The FCA cancelled the Part 4A permission of Bayliss & Co (Financial Services) Limited (Bayliss) and finedClive Rosier, its sole approved person and director, £10,000, after the Court of Appeal refused their applications for permission to appeal a decision by the Upper Tribunal (Tax and Chancery Chamber). The FCA has also withdrawn the significant influence approvals granted to Mr Rosier at Bayliss, and prohibited him from performing significant influence functions in the future.

The Financial Reporting Council (FRC) closed its investigation into the conduct of PricewaterhouseCoopers LLP (PwC LLP) in relation to its role in reporting to the Financial Services Authority (now the Financial Conduct Authority) on Barclays Bank PLC’s compliance with the FSA’s client asset rules for the years ended 31 December 2007 to 31 December 2011. The FRC has concluded that there is not a realistic prospect that a tribunal would make an adverse finding against PwC LLP in respect of the matters within the scope of the investigation.

FOS changes PPI time limit rules

The Financial Ombudsman Service (FOS) issued a feedback statement on its consultation on amending its rules to make changes to the time limits for PPI complaints. The consultation, which closed on 12 July 2017, received two responses, both of which supported the changes. The FOS board passed the instrument on 26 July 2017. The FCA board consented to and approved the rule changes on 20 July 2017.

FOS consults on changes to benchmarks, MiFID II and advice rules

The FOS opened a consultation on amendments to the rules regarding the Benchmarks Regulation, MiFID II and advising on investments. Chapter 2 of the ‘Dispute Resolution: Complaints sourcebook’ (DISP) sets the scope of the jurisdiction of the FOS. The Financial Conduct Authority (FCA) is proposing to make a number of changes to DISP 2 as a result of recent legislative changes. This consultation proposes to mirror these changes in the voluntary jurisdiction. Feedback is sought by 6 November 2017.

Markets and trading

MiFIR amendments relating to third country central banks published in the Official Journal

Commission Delegated Regulation (EU) 2017/1799 of 12 June 2017 supplementing Regulation (EU) 600/2014 of the European Parliament and of the Council (MiFIR), as regards the exemption of certain third countries central banks in their performance of monetary, foreign exchange and financial stability policies from pre- and post-trade transparency requirements was published in the Official Journal of the EU.

EMIR amendments relating to trade repository data published in the Official Journal

Commission Delegated Regulation (EU) 2017/1800 of 29 June 2017 amending Delegated Regulation (EU) 151/2013 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council (EMIR) was published in the Official Journal of the EU.

The General Secretariat of the Council of the European Union recommended that the Council confirms that it will not object to delegated regulations adopted by the European Commission with regard to non-equity consolidated tape providers (CTPs) under MiFID II, indirect clearing under EMIR and MiFIR, and standardised terminology for representative services linked to a payment account under the Payment Accounts Directive.

In separate ‘I/A’ item notes, the General Secretariat suggested that the Permanent Representatives Committee (Coreper) recommend that the Council confirm that it has no intention to object to the following delegated regulations:

Council of the EU announces non-objection on MiFIR

The Council of the European Union announced that it would not object to the Delegated Regulation supplementing Regulation (EU) 600/2014 on markets in financial instruments with regard to package orders.

Council of EU adopts regulation to amend EuVECA and EuSEF

The Council of the European Union adopted new venture capital rules aimed at boosting investment in start-ups and innovation. The regulation is part of the EU’s plan to develop a fully functioning capital markets union.

Commission sets out conditions for assessing existing benchmarks

The European Commission adopted a Delegated Regulation setting out a non-exhaustive list of conditions that competent authorities should take into account when deciding whether to permit the use of an existing benchmark that does not meet the requirements of the Benchmarks Regulation.

ESMA publishes Q&A on MiFID II and MiFIR implementation

ESMA issued a Q&A on post-trading issues regarding the implementation of MiFID II and MiFIR. The new Q&A concerns straight through processing.

ESMA published a template delegation agreement for tasks under Article 22(1) and 27(1) of MiFIR, Article 4(1) of the Market Abuse Regulation and Article 81(3) of EMIR. Delegation of tasks may in certain cases be a useful instrument in the network of supervisors forming part of the European System of Financial Supervision in order to reduce the duplication of supervisory tasks, to foster co-operation and to reduce the burden imposed on financial market participants.

ISDA 2017 Venezuela Additional Provisions Protocol launched

The International Swaps and Derivatives Association (ISDA) launched the 2017 Venezuela Additional Provisions Protocol which is intended to help market participants that have entered into credit derivatives transactions referencing Venezuela or Petroleos de Venezuela, S.A. following the imposition of sanctions on Venezuela by the US. The protocol is open for adherence for ISDA members and non-members from 11 October 2017 until 18 October 2017.

ESMA urges firms not to delay LEI compliance procedures

ESMA published a briefing on the Legal Entity Identifier (LEI) as part of its efforts to raise industry awareness and facilitate compliance with the LEI requirements under MiFID II ahead of its 3 January 2018 launch.

Commission seeks EBA advice on creation of European Secured Notes

The European Commission asked the EBA for technical advice on its plan to create an EU framework on covered bonds and assess the case for European Secured Notes (ESNs) for SME bank loans and infrastructure bank loans. The ESN asset class would aim to cover a funding segment located between traditional covered bonds and STS securitisations. The Commission says it could increase the variety of funding tools available to banks, unlocking more financing for SMEs and infrastructure projects, and contributing to economic growth and investment.

ECB opinion supports Commission’s CCP proposals

The European Central Bank (ECB) delivered an opinion on the proposal for a regulation amending the ESMA Regulation (Regulation (EU) 1095/2010) and EMIR with regard to the procedures and authorities involved for the authorisation of central counterparties (CCPs) and the recognition of third country CCPs. The ECB strongly supports the initiative set out in the Commission’s proposal to enhance the role of the relevant members of the European System of Central Banks—as central banks of issue of the currencies of financial instruments cleared by CCPs—in the process for the supervision of Union CCPs and the recognition of third country CCPs.

FSB progress report on interest rate benchmark reforms

The Financial Stability Board (FSB) published a report ‘Reforming major interest rate benchmarks‘ covering progress on implementation of the FSB’s recommendations to reform major interest rate benchmarks. The report concludes that administrators of key interbank offered rates (IBORs) have continued to take important steps to implement the FSB’s recommendations, but in the case of some IBORs, such as LIBOR and EURIBOR, underlying reference transactions in some currency-tenor combinations are scarce and submissions therefore necessarily remain based on a mixture of factors including transactions and judgement by submitters.

IOSCO analyses Other CRA Products used to make investment and credit-related decisions

The Board of the International Organization of Securities Commissions (IOSCO) published a report on 11 October 2017 on Other CRA Products (OCPs), which provides market participants with a better understanding of certain non-traditional products and services offered by credit rating agencies (CRAs).

ESMA updates recognised third country CCP list

ESMA updated today its list of central counterparties (CCPs) based in third countries that can offer services and activities in the EU. Three Indian clearing houses have been added to the list: Indian Clearing Corporation Limited ICCL, National Securities Clearing Corporation Limited, and MCX-SX Clearing Corporation.

BCBS allows national discretion on NSFR for derivative liabilities

The Basel Committee on Banking Supervision (BCBS) agreed to allow national discretion for the net stable funding ratio (NSFR) treatment of derivative liabilities. The BCBS says this should facilitate the implementation of the NSFR, which is expected to begin on 1 January 2018.

IOSCO issued a statement on the research carried out by the IOSCO taskforce on over-the-counter derivatives regulation into the functioning of the International Swaps and Derivatives Association (ISDA) Credit Derivatives Determinations Committee (DC) and credit default swap (CDS) auction processes.

The Australian Securitisation Forum, the Global Financial Markets Association, the International Capital Market Association, and the Institute of International Finance made a joint response to the Basel Committee on Banking Supervision and International Organization of Securities Commissions (IOSCO) consultation on the criteria for and capital treatment of simple, transparent and comparable short-term securitisations (July 2017). The criteria were designed to help the parties to such transactions to evaluate the risks of a particular securitisation across similar products and to assist investors with their conduct of due diligence on securitisations.

FIA praises US Treasury capital markets report

The Futures Industry Association (FIA) released a statement commending a US Department of the Treasury report: ‘A financial system that creates economic opportunities’, concerning capital markets. FIA President and CEO Walt Lukken praised the report for addressing important capital market issues that impact on centrally cleared derivatives, particularly the recommendations concerning initial margin and a suggested alternative to the current exposure method for calculating capital requirements.

ESMA chair on value of financial literacy to consumers and the market

The chair of ESMA, Steven Maijoor, gave a speech on financial education and investor protection at the International Organization of Security Commissions World Investor Week. Mr Maijoor said investors who are more financially literate should be able to take more rational investment decisions and should be less prone to ‘sheep-like behaviours that are disruptive for the stability of financial markets’.

BoE director says fast trading demands understanding and vigilance

The Bank of England (BoE) executive director for markets, Chris Salmon, spoke at the 13th Annual Central Bank Conference on the Microstructure of Financial Markets in London about the implications of the trend toward more electronic and automated trading. According to Mr Salmon, regulators need to remain vigilant and deepen their understanding of the risks and benefits of fast markets, so they can take appropriate action in the future if necessary, either from a macro-prudential or supervisory perspective.

Investment funds and wealth management

ESMA updates AIFMD and UCITS Q&As

ESMA published updated Q&As on the application of the Undertakings for the Alternative Investment Fund Managers Directive (AIFMD) and the Collective Investment in Transferable Securities Directive (UCITS).

IOSCO World Investor Week concludes

World Investor Week 2017, organised by IOSCO, concluded, with securities regulators and other stakeholders from more than 80 countries having led a programme of events to educate and protect investors. The International Forum for Investor Education and the Financial Planning Standards Board also supported the campaign.

Consumer credit, mortgage and home finance

FCA publishes PPRO Financial Limited’s Notice of Undertaking

The FCA published a Notice of Undertaking given by PPRO Financial Limited (PPRO) in which PPRO has agreed to make changes to its consumer terms and conditions, dated April 2016. PPRO uses these terms and conditions in contracts with its prepaid card customers (VIABUY Prepaid MasterCard).

FCA CEO outlines work on consumer credit and long-term savings

The chief executive of the FCA, Andrew Bailey, gave a speech on consumer credit, long-term savings, and the impacts of an ageing population. The speech looks at how social issues and the public interest impact on financial services and the City.

Report says financial services firms could do more to attract female clients

Research firm Kantar issued a report finding that financial services organisations could be missing billions of pounds worth of business opportunities by not winning over women. The report, Winning Over Women, suggests that UK financial institutions are failing to connect with female customers at every stage of the buying journey, from advertising to offerings.

Insurance and pensions

EIOPA publishes guidelines on ‘execution-only’ sales

The European Insurance and Occupational Pensions Authority (EIOPA) published guidelines on ‘execution-only’ sales with respect to insurance-based investment products (IBIPs), in line with Articles 30(7) and (8) of the Insurance Distribution Directive (IDD). The guidelines aim to minimise the risks of consumer detriment arising from misselling of IBIPs while also setting a suitable framework to allow for ‘execution-only’ sales of products.

EIOPA issues new Solvency II Q&As

The EIOPA published new Q&As on the Solvency II regulations. The questions cover the templates for the submission of information to the supervisory authorities, the procedures, formats and templates of the solvency and financial condition report, and the Commission Delegated Regulation (EU) 2015/35 supplementing Directive 2009/138/EC.

Insurance Europe (IE) and the European Fund and Asset Management Association (EFAMA) published updated PRIIPs information exchange templates. The templates were originally published in June 2017 and are meant to provide a functional description of the set of data to be exchanged from asset managers and banks to insurers to help them fulfil their PRIIPs regulatory obligations.

Insurance Europe publishes data breach notification template

Insurance Europe developed a template for data breach notifications under the General Data Protection Regulation (GDPR). The aim is to facilitate the development of the EU cyber-insurance market, by giving insurers access to anonymised data collected under the GDPR and Network Information Security Directive.

EIOPA chair reviews progress and calls for stronger powers

The chair of EIOPA, Gabriel Bernardino, delivered a statement at the hearing of the European Parliament’s Economic and Monetary Affairs Committee, setting out EIOPA’s work on supervisory convergence, consumer protection and financial stability.

BIS report looks at low interest rate risks for insurers

The Bank for International Settlements (BIS) published a report based on a survey of insurance supervisory authorities, examining the effect of low interest rates on life insurers. The paper look at the tools available to supervisors for dealing with firms in difficulties, and says some supervisors could benefit from additional powers that may require legislative changes.

Payments and payment services

The European Commission adopted a Delegated Regulation with regard to regulatory technical standards (RTS) setting out what payment card schemes and processing entities must do to ensure their independence in terms of accounting, organisation and decision-making processes under Regulation (EU) 2015/751 on interchange fees for card-based payment transactions (the Interchange Fee Regulation).

The Committee on Payments and Market Infrastructures (CPMI) published a preliminary version of 2016 statistics on payment, clearing and settlement systems in the CPMI countries. A final version will be published in December 2017.

PSR head of policy discusses payments innovation

The Payment Systems Regulator (PSR) published the text of a speech given by its head of policy, Paul Smith, at the Payments Innovation Conference in Johannesburg, South Africa. Mr Smith discussed the unique role of the PSR, noting that there is no institution in the world with quite the same role and powers. He discussed the establishment and the jurisdiction of the PSR and its three statutory objectives, which are to promote competition, promote innovation, and to act in the interests of service-users.

Fintech and virtual currencies

BoE announces latest proofs of concept at the FinTech Accelerator

The executive director for banking, payments and financial resilience at the BoE, Andrew Hauser, announced the firms the bank will be working with in the latest cohort of proofs of concept (PoCs) at the FinTech Accelerator. Speaking to FinTech firms at a meeting in Cambridge, Mr Hauser also reflected on the work of the Accelerator since its launch in June 2016.

Applications open for (re)authorisation and (re)registration with the FCA under the Payment Services Regulations 2017.

]]>http://blogs.lexisnexis.co.uk/fs/weekly-highlights-12-october-2017/feed/0http://blogs.lexisnexis.co.uk/fs/weekly-highlights-12-october-2017/Weekly highlights—5 October 2017http://feedproxy.google.com/~r/FinancialServicesBlog/~3/aptJ2Bi_QxM/
http://blogs.lexisnexis.co.uk/fs/weekly-highlights-5-october-2017/#respondThu, 05 Oct 2017 15:16:59 +0000http://blogs.lexisnexis.co.uk/fs/?p=7926Read More...]]>Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 5 October 2017.

Brexit

European Parliament motion says ‘sufficient progress’ not made in Brexit negotiations

The European Council should determine that ‘sufficient progress’ has not been made on the EU’s three key aims unless the fifth round talks provide a major breakthrough, according to a draft resolution endorsed by the European Parliament’s Conference of Presidents. MEPs will debate the motion with EU Commission president, Jean-Claude Juncker and chief negotiator, Michel Barnier before a full vote takes place.

Andrew Bailey calls for free trade and open markets post-Brexit

The chief executive of the Financial Conduct Authority (FCA), Andrew Bailey, called for regulatory co-operation to minimise the risks from Brexit and support a transition to a new relationship between the UK and the EU. In a speech at the Official Monetary and Financial Institutions Forum, he warned that Brexit could disrupt financial services for the UK, the EU and globally, and said that common regulatory standards are a necessary condition for free trade in finance.

PM stresses importance of financial sector in Bank of England speech

The UK Prime Minister, Theresa May, expressed confidence that the UK and EU will be able to agree a new partnership that will enable them to ‘continue to work together’ to bring prosperity to all citizens. Speaking at the 20th anniversary of Bank of England (BoE) independence event on 27 September 2017, Ms May said that fragmentation of the financial services markets was in neither the EU’s nor the UK’s interest.

Prudential Regulation Authority updates

PRA regulatory digest for September 2017 available

The Prudential Regulation Authority (PRA) published its regulatory digest for September 2017. This issue includes a letter from Sam Woods on transitional arrangements for capital impact of IFRS 9 expected credit loss accounting, and details on the consultation on regulated fee and levies: adjustment to rates for 2017/18.

Regulatory architecture

The European Commission delivered an opinion strongly supporting the European Central Bank (ECB)’s proposal to regulate clearing systems for financial instruments for monetary policy purposes. The Commission says the move would enable the ECB to perform fully the responsibilities being granted to central banks of issue as concerns clearing systems for financial instruments denominated in euro. The ECB is seeking an amendment to Article 22 of Protocol No 4 on the Statute of the European System of Central Banks and of the European Central Bank.

ECB director calls for more harmonisation of EU banking supervision

European banking supervisors need more harmonised rules and tools, according to Sabine Lautenschläger, a member of the executive board and vice-chair of the supervisory board of the European Central Bank (ECB). Speaking at the European Supervisor Education Initiative’s 2017 Conference in Vienna, Ms Lautenschläger also said that EU banks must be allowed to fail in order for markets to work.

ESMA announces new standing committee chairs

The Board of Supervisors of the European Securities and Markets Authority (ESMA) appointed new chairs to its standing committees. The standing committees are expert groups drawn from ESMA staff and the national competent authorities for securities markets regulation in the Member States, and are responsible for the development of policy in their respective areas.

Regulated activities

The FCA and the Pensions Regulator published a guide for employers and pension trustees who wish to help their employees with financial matters without needing to be authorised by the FCA. An employer or trustee will only need FCA authorisation if they are in the business of providing investment advice and if they receive a ‘commercial benefit’ for helping their employees. Because employers and trustees are not generally in the business of giving investment advice and do not normally receive any commercial benefit for giving advice, or helping their employees with pensions or other financial matters, employers usually should be able to help their staff without needing to be authorised.

The FCA released final guidance (FG17/8) on streamlined advice and the fact find process, together with a summary of feedback received to its guidance consultation GC17/4, which was published in April 2017.

Authorisation, approval and supervision

PRA publishes amendments to Senior Managers Regime forms

The PRA published PS24/17 ‘Strengthening individual accountability in banking: changes to SMR forms’, which includes amendments to a number of forms used in the Senior Managers Regime, which the PRA shares with the FCA.

Prudential requirements

PRA publishes occasional consultation paper

The PRA has published an occasional consultation paper (PRA CP18/17, FCA CP17/34) which sets out proposed changes to PRA Rulebook Parts and supervisory statements (SS), together with joint PRA/FCA proposals.

PRA issues publications on Internal Ratings Based approach

The PRA published PS23/17 ‘Internal Ratings Based (IRB) approach: clarifying PRA expectations’ and an update of SS11/13 ‘Internal Ratings Based (IRB) approaches’.

PRA issues publications on Pillar 2A capital approach

The PRA has published four documents on the Pillar 2A capital approach. The documents are:

an updated version of SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’

an updated version of SS32/15 ‘Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082’ (and updated instructions for FSA076, FSA077 and an updated regulatory reporting schedule), and

PRA issues publications on the UK leverage ratio framework

The PRA published PS21/17 ‘UK Leverage Ratio treatment of claims on central banks’, an update to SS46/15‘UK leverage ratio: instructions for completing data items FAS083 and FSA084’, and an updated FSA083template and instructions. These reporting changes come into effect immediately, so will apply to firms’ reporting and disclosure requirements for end-December 2017 onwards.

BoE updates approach to resolution

The Bank of England (BoE) published an updated version of its document ‘The Bank of England’s approach to resolution‘. It describes the framework available to the BoE to resolve failing banks, building societies and some types of investment firms. It also explains arrangements for central counterparties (CCPs).

ECB consults on reinforced NPL guidance for banks

The ECB launched a public consultation on a draft addendum to the ECB guidance on non-performing loans (NPLs). The draft addendum specifies quantitative supervisory expectations for minimum levels of prudential provisions for new NPLs, and further reinforces the guidance of 20 March 2017 with regard to fostering timely provisioning and write-off practices. The supervisory expectations will apply to all exposures that are newly classified as non-performing in line with the EBA definition as of 1 January 2018.

The Committee on Economic and Monetary Affairs (ECON) of the European Parliament published draft reports on two proposals (2016/0361(COD) and 2016/0362(COD)) by the European Commission to amend EU legislation with regard to the loss-absorbing and recapitalisation capacity of credit institutions and investment firms.

EBA signs bank resolution co-operation agreement with US agencies

The EBA signed a framework co-operation arrangement with several US financial regulatory agencies, laying out the basis for co-operation arrangements on bank crisis management and resolution between any of the EU supervisory or resolution authorities and any of the participating US agencies. The arrangement covers crisis management related topics, including early intervention, resolution planning, resolvability assessment, and resolution.

Council to endorse delegated regulation on waiver of own funds requirements for certain covered bonds

The General Secretariat of the Council of the EU recommended that the Council confirms that it will not object to the delegated regulation adopted by the European Commission on 11 August 2017 amending Regulation (EU) 575/2013 (the Capital Requirements Regulation) as regards the waiver of own funds requirements for certain covered bonds.

EBA comments on IFRS 13 post-implementation review

The EBA published a letter to the International Accounting Standards Board (IASB) setting out the EBA’s comments on the post-implementation review of IFRS 13 on fair value measurement. The EBA believes that the introduction of IFRS 13 has improved the financial information provided in banks’ financial statements and contributed to the understanding of their balance sheets. Application of the standard by banks has, however, highlighted some areas where it would be beneficial to provide further guidance.

FPC publishes record of 20 September 2017 meeting

The Financial Policy Committee (FPC) published a summary of its 20 September 2017 meeting. Topics covered included setting the countercyclical capital buffer (CCyB) rate, the appropriate loss rate on consumer credit in the Bank of England’s 2017 annual stress test of major UK banks, the interaction of IFRS 9 accounting with the stress test, and the FPC’s recommendation to the PRA about its rules on the leverage ratio.

Sir Jon Cunliffe considers lessons of Northern Rock

The Bank of England (BoE)’s Sir Jon Cunliffe spoke at the Single Resolution Board Annual Conference in Brussels on the 10th anniversary of the failure of Northern Rock. In his speech, Mr Cunliffe considers why the BoE was unable safely to wind up a failing bank without taxpayer intervention, the progress that has been made in the UK towards rectifying those failings, and some of the challenges that remain.

ECB chair calls for further EU banking harmonisation

The chair of the supervisory board of the ECB, Danièle Nouy, spoke at the Single Resolution Board Conference in Brussels, saying that while the EU banking union is going in the right direction, more needs to be done to help it keep its promises.

Risk management and controls

Committee calls for better EU-wide whistle-blower protection

The European Parliament’s legal affairs committee called for rules to better protect and support whistle-blowers and their role in revealing serious breaches the public interest. The committee described current whistle-blowing protections as ‘patchy’ and less than adequate in many EU countries. It has urged the EU Commission to propose new rules before the end of 2017, to provide EU wide protection.

Financial crime

MEPs push for more tools to prevent cyber crime

MEPs urged the EU to do more to prevent cyber-attacks and online sexual abuse. The European Parliament voted through a resolution which calls on Member States to step up cooperation and information exchange among police and judicial authorities. The resolution argues that preventative measures which have been taken by individual users, public institutions and businesses are ‘wholly inadequate’.

European Parliament’s first reading of control of cash proposal

The European Parliament published its suggested amendments to the proposal for a regulation on controls on cash entering or leaving the EU, and repealing Regulation (EC) 1889/2005. The proposed regulation aims at tightening controls on people entering or leaving the EU with €10,000 or more in cash or precious commodities, or which are sent through postal parcels or in freight consignments. The proposed regulation is a further effort to stop the financing of criminal activities, and put an end to the exploitation by criminals of different national rules related to cash controls.

FCA conduct requirements

Rates of return for FCA prescribed projections

The FCA released a report on the rates of return for prescribed projections relating to the maximum rates of return that financial services companies must use in their calculations when providing retail customers with projections of future benefits. The rules regarding projection rates can be found in the FCA Conduct of Business Sourcebook (COBS) in section 13. The FCA prescribed projection rates can be found in COBS 13 Annex 2.

Enforcement and redress

Complaints Commissioner finds FCA made serious errors

The Complaints Commissioner (CC) published two final notices (FCA00062 and FCA00097) relating to an investigation which started in November 2012. Following the issue by the FCA’s Regulatory Decisions Committee (RDC) of a warning notice in 2014, the FCA gave notice that it was not pursuing a case under Section 66 of the Financial Services and Markets Act 2000 (FSMA 2000) for reasons of limitation. The CC found that the FCA made serious errors in the way it handled potential limitation issues before the issue of the warning notice by the RDC but did not find evidence that the FCA acted in bad faith or that information was deliberately withheld from the RDC or the complainant.

MiFID II and MiFIR

ESMA guidelines on management bodies of market operators and DRSPs

ESMA published final guidelines on the management bodies of market operators and data reporting services providers (DRSPs). The guidelines are intended to develop common standards to be taken into consideration by market operators and DRSPs when appointing new and assessing current members of the management body, and to provide guidance on how information should be recorded by market operators and DRSPs in order to make it available to competent authorities for the exercise of their supervisory duties.

EBA issues opinion on new prudential framework for investment firms

The EBA published an opinion on the design and calibration of a new prudential framework for investment firms, which is specifically tailored to the needs of investment firms’ different business models and inherent risks. The opinion includes a series of recommendations aiming to develop a single and harmonised set of requirements that are reasonably simple, proportionate and relevant to the nature of investment firms authorised to provide MiFID services and activities.

ESMA updates MiFID II and MiFIR Q&As

ESMA updated its Q&As on MiFID II and MiFIR investor protection and intermediaries topics. There are new Q&As on best execution, recording of telephone conversations and electronic communications, post-sale reporting, information on costs and charges, and client categorisation.

ESMA further updates its MIFID II Q&As—market structure topics

ESMA further updated its Q&As on MiFID II and MiFIR. In addition to its new guidance on investor protection and intermediaries topics, ESMA provided further updates on market structure issues. Subjects covered include Direct Electronic Access (DEA) and algorithmic trading, as well as multilateral and bilateral systems.

ESMA and NCAs revise work plan for position limits and transparency waivers

ESMA and national competent authorities (NCAs) updated their work plan for the opinions on pre-trade transparency waivers and position limits that must be issued under the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). In view of the large number of opinions to be issued, the work plan presents a pragmatic approach for ensuring that the waivers and position limits can be implemented as of 3 January 2018, pending the issuance of the opinions.

ESMA publishes translations of transaction reporting, order record keeping and clock synchronisation guidelines

ESMA issued the official translations of its guidelines on transaction reporting, order record keeping and clock synchronisation under the Markets in Financial Instruments Directive (MiFID II).

FCA approves four approved reporting mechanisms under MiFID II

The FCA announced the authorisation of Abide Financial DRSP Limited, Bloomberg Data Reporting Services Ltd, London Stock Exchange plc (UnaVista) and Xtrakter Ltd (Trax) as approved reporting mechanisms (ARMs). This follows the authorisation of six approved publication arrangements (APAs) on 24 August 2017.

Markets and trading

ESMA consults on guidelines on non-significant benchmarks

ESMA launched a consultation on guidelines detailing the obligations which apply to non-significant benchmarks under the Benchmarks Regulation. The closing date for comments is 30 November 2017.

ESMA updates Q&As on the Benchmarks Regulation

ESMA updated its Q&As on the implementation of the Benchmarks Regulation (BMR). The update includes four new answers, covering the scope of the BMR, including its application to EU and third country central banks and the exemption on single reference price, and definitions of ‘family of benchmarks’ and ‘use of a benchmark’.

ESMA updates CSDR Q&As

ESMA updated its Q&As on the implementation of the Central Securities Depositories Regulation (EU) 909/2014 (CSDR). There are new Q&As on protection of securities of participants and those of their clients, the provision of banking-type ancillary services, and the requirements for central securities depository links.

FSB consults on unique product identifier governance

The Financial Stability Board (FSB) published a consultation on ‘Governance arrangements for the unique product identifier (UPI)’. It sets out proposals for the governance arrangements for a global UPI, as a key harmonised identifier designed to facilitate effective aggregation of transaction reports about over-the-counter (OTC) derivatives markets. The consultation closes on 13 November 2017.

European Commission adopts two delegated regulations supplementing the Benchmark Regulation

The European Commission adopted two delegated regulations (C(2017) 6474 final and C(2017) 6464 final) supplementing Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (the Benchmarks Regulation).

The European Commission adopted a third delegated regulation (C(2017) 6469 final) supplementing the Benchmarks Regulation. The delegated regulation specifies how the criteria of Article 20(1)(c)(iii) are to be applied for assessing whether certain events would result in significant and adverse impacts on market integrity, financial stability, consumers, the real economy or the financing of households and businesses in one or more Member States.

Changes to the filing of regulated information by listed companies from 1 October 2017

The rules relating to the filing of information by issuers with the FCA set out in chapter 6 of the Disclosure Guidance and Transparency Rules sourcebook (DTR) have been amended. Under the DTR, an issuer is required to file regulated information with the FCA at the same time as it discloses this information to the public. Under new DTR 6.2.2A, which came into force on 1 October 2017, an issuer is required to supply the FCA with a legal entity identifier (LEI) when it files regulated information. An LEI is a 20-character reference code that uniquely identifies a legal entity that is a party to a financial transaction.

Early application process opens for benchmark administrators

The FCA is now accepting early applications to become an authorised or registered benchmark administrator ahead of the process formally opening on 1 January 2018. The timeframes set out in the EU Benchmarks Regulation—four months for authorisation and 45 days for registration—apply from 1 January 2018. Submitting an early application allows the FCA to review draft applications before the time limits are triggered.

ESMA updates MAR Q&As

ESMA updated its Q&As on the Market Abuse Regulation (MAR) to include a new Q&A 5.2 on the delayed disclosure of inside information that subsequently loses the element of price sensitivity. Under Article 17(1) of the MAR, an issuer has to inform the public as soon as possible of inside information that directly concerns that issuer. However, Article 17(4) of the MAR states that an issuer may, on its own responsibility, delay disclosure of inside information to the public, provided that certain conditions are met.

ESMA publishes template for CSD register information

ESMA published a template to be used by competent authorities to send information to ESMA for inclusion in the central securities depository (CSD) register pursuant to Articles 21 and 58 of Regulation (EU) No 909/2014 (the CSDR).

Council publishes compromise position on EMIR amendments

The Presidency of the Council of the European Union published a compromise text of the European Commission’s proposal for a regulation amending Regulation (EU) No 648/2012 (EMIR) as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for over-the-counter derivatives contracts not cleared by a central counterparty, the registration and supervision of trade repositories and the requirements for trade repositories.

The quality and quantity of dividend policy and practice disclosures improved, according to the findings of a study conducted by the Financial Reporting Council’s (FRC) Financial Reporting Lab (Lab). Among other things, the study covers how practice has improved based on the Lab’s review of dividend disclosures by FTSE 350 companies in their 2016 annual reports.

ISDA warns against proposed moratoria powers under BRRD

The International Swaps and Derivatives Association (ISDA) published a paper on the European Commission’s proposed moratoria powers under the Bank Recovery and Resolution Directive (BRRD). ISDA warns that the proposed powers could trigger opt-out rights for entities that have adhered to the ISDA 2015 Universal Resolution Stay Protocol (Universal Stay Protocol), thereby jeopardising the protocol’s effectiveness for EU financial institutions.

CPMI-IOSCO report aims for harmonisation of UPIs for OTC derivatives

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) co-published a report on Harmonisation of the Unique Product Identifier (UPI), providing technical guidance to authorities on a uniform global UPI applying to over-the-counter (OTC) derivatives transactions.

FIA responds to CFTC call for rules reform

The Futures Industry Association (FIA) responded to a call from the Commodity Futures Trading Commission (CFTC) for suggestions on simplifying and modernising CFTC rules via ‘Project KISS’. FIA says its suggestions are designed to maximise the CFTC’s ability to promote competitive, well-regulated markets while reducing unnecessary burdens on market participants.

Investment funds and asset management

ESMA released compliance tables listing the competent authorities that either comply or intend to comply with its guidelines on sound remuneration policies under the UCITS Directive (ESMA/2016/575) and under the AIFMD (ESMA/2016/579).

The executive director of supervision for investment, wholesale and specialists at the FCA, Megan Butler, clarified the FCA’s supervisory priorities and provided an update on its ongoing work regarding the asset management industry. Speaking at the FT Investment Management Summit Europe 2017 on 28 September 2017, Ms Butler also provided detail on the FCA’s approach to the extension of the Senior Managers and Certification Regime (SMCR), the implementation of MiFID II, and Brexit.

IOSCO World Investor Week aims to increase education and protection

The International Organization of Securities Commissions (IOSCO) launched its first World Investor Week (WIW) from 2-8 October 2017. Throughout the week, securities regulators and other stakeholders from more than 70 countries are organising activities and events to increase the awareness of investor education and protection in their own jurisdictions.

Consumer credit, mortgage and home finance

The Competition Appeal Tribunal (CAT) refused the applicant, Walter Hugh Merricks, permission to appeal the CAT’s judgment of 21 July 2017 (the judgment), dismissing the applicant’s application for a collective proceedings order (CPO) under section 47B of the Competition Act 1998. The CAT refused on the basis that there is no jurisdiction to grant permission to appeal under section 49(1A) of the Competition Act 1998 and rejected the applicant’s grounds of appeal on the merits. It remains to be seen whether the applicant will now challenge the judgment by judicial review.

Merger of the Consumer Finance Association and BCCA

The Consumer Finance Association (CFA) announced its merger with the BCCA. In the agreement to merge the CFA has purchased the assets of the BCCA. Both sets of directors have agreed that they will operate under the CFA brand. The new association brings together lenders, brokers and service suppliers, and will be the principal trade association representing the short-term lending sector in the UK.

Insurance and pensions

EIOPA publishes 2018 work programme

The European Insurance and Occupational Pensions Authority (EIOPA) published its work programme for 2018, highlighting and specifying the activities and tasks of EIOPA for the coming year, within the framework of a multi-annual work programme for 2017-2019.

EIOPA chair outlines recommendations for Solvency II implementation

The chair of the European Insurance and Occupational Pensions Authority (EIOPA), Gabriel Bernardino, wrote an article in Enterprise Risk magazine on the lessons to be learned by insurers in implementing Solvency II. EIOPA’s analysis shows that while insurance and reinsurance companies are making good progress in implementation, there is scope for further improvements.

FCA warns firms on defined benefit pension transfer advice

The FCA is looking at the advice consumers receive on defined benefit (DB) pension transfers and whether they are at risk of harm. The number of people transferring has grown ‘significantly’ in the last year, and the FCA’s preliminary research has identified areas of risk and cases where firms have not given enough attention to customer outcomes when changing their business models.

Insurance Europe sets out views on ICP 24 proposal

Insurance Europe (IE) responded to the International Association of Insurance Supervisors (IAIS) consultation on revisions to Insurance Core Principle (ICP) 24. IE made a number of suggested amendments and deletions.

Payment services and systems

RTS on standardised terminology under the Payment Accounts Directive

The European Commission adopted a Delegated Regulation supplementing the Payment Accounts Directive 2014/92/EU (PAD) with regard to regulatory technical standards (RTS) for Union standardised terminology for most representative services linked to a payment account. The Delegated Regulation will enter into force on the 20th day following its publication in the Official Journal of the EU.

Commission refers Spain to the CJEU for failure to implement payment accounts rules

The European Commission referred Spain to the Court of Justice of the EU for failure to notify measures for fully implementing the EU Payment Accounts Directive (Directive 2014/92/EU).

FCA updates PSD2 information page

The FCA updated its webpage on the revised Payment Services Directive (EU) 2015/2366 (PSD2), which provides background, timelines and links to related documents, including the FCA’s consultations and policy statements.

PSR director provides update on new payment system operator

The managing director of the Payment Systems Regulator (PSR), Hannah Nixon, provided a progress update on the new payment system operator (NPSO), reflecting on the steps that have been taken so far as well as the work that remains to be done. The NPSO was created to take forward a number of recommendations made by the Payments Strategy Forum, including the consolidation of the operators of BACS, Faster Payments and the new cheque imaging system.

CPMI sets out seven-point strategy to tackle wholesale payments fraud

The Committee on Payments and Market Infrastructures (CPMI) is consulting on a strategy to tackle the increasing threat of wholesale payments fraud related to endpoint security. The strategy sets out seven elements designed to address all areas relevant to preventing, detecting, responding to and communicating about wholesale payments fraud. Feedback is sought by 28 November 2017.

Deadline for responses to the BoE public working draft (PWD) of the standalone ring-fencing taxonomy that will make up part of v3.0 of the Bank of England Banking XBRL Taxonomy, alongside related technical artefacts.